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European Central Bank

Digital Euro Gains Support From Netherland’s Queen Máxima

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The work the European Central Bank has accomplished in its efforts to introduce a digital euro has been commended by Queen Maxima of the Netherlands.

On 7 November 2022, the queen gave a virtual speech at a European Commission conference with the theme “Towards a legislative framework enabling a digital euro for citizens and for businesses.” She claimed that by removing barriers like transaction fees and paperwork requirements, a digital euro could promote financial inclusion among underserved communities. A central bank digital currency, or CBDC, in the European Union might help lower the cost of transfers, but it might need protections and legislative changes “to address difficulties and risks,” the report claims.

The Queen stated,

“Public sector representatives have a duty to ensure that the financial system is open, inclusive, and responsive to the needs of all groups. So let us envision that better future and build a digital euro that works for all Europeans.”

Since becoming queen consort of the Netherlands in 2013, Máxima has occasionally used her platform to promote financial technology as a tool for inclusion, highlighting CBDCs in particular. Since 1814, the Netherlands has been governed by a constitutional monarchy, with the monarch, in this case King Willem-Alexander, serving mostly as a ceremonial head of state. Additionally, Queen Maxima represents inclusive finance for development as a special champion for the UN secretary-general.

The Bitcoin Amsterdam conference, which took place in the Netherlands in October, attracted other dignitaries like Prince Philip of Serbia and policymakers like former European Parliament member Nigel Farage. Following regulatory approval from the Netherlands’ central bank in September, U.S.-based cryptocurrency exchange Coinbase also declared its entry into that country.

Digital Euro Legislation To Soon Be Proposed By EC

According to Christine Lagarde, president of the European Central Bank (ECB), legislation governing the digital Euro will shortly be released by the European Commission (EC). When Lagarde made these comments, she was speaking at a conference titled “Towards a Legislative Framework Enabling a Digital Euro for Citizens and Businesses.” She further stated,

“The timely adoption of a legal framework for the digital euro would give all stakeholders the necessary legal certainty to prepare for its possible introduction and send a strong signal of political support… I’m very much looking forward to the legislative proposal for establishing a digital Euro, which the European Commission will propose shortly.” 

The ECB Governing Council said in July 2021 that it will look into the initiative in order to address the major problems with the creation and distribution of a European CBDC. In order to protect privacy and minimize risks for European residents, intermediaries, and the economy, it is considering different design choices.

European Central Bank official Fabio Panetta comments on the digital euro

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The Digital euro has been in talks for months, and recently, the European Central Bank executive Fabio Panetta commented on the creation and development of a central bank digital currency (CBDC) in Europe. Panetta claims that the digital euro’s success is a must, but it should not be so successful and popular that it puts the current monetary system in Europe at risk.

While a number of people in the country are actively investing in cryptocurrencies, the continent hasn’t released any special law regarding cryptocurrencies. Panetta is a senior-ranked official at the European Central Bank who claims that the cash is being undervalued to the increase in popularity of digital payments, especially after the Covid-19 crisis.

Although a number of nations have come up with their digital currencies and even the United Kingdom is looking to launch its own CBDC, there is no confirmation regarding a digital euro as of now.

European Central Bank to limit digital euro’s success?

The member of the Executive Board of the European Central Bank, Fabio Panetta, claims that the popularity of digital payments might make the digital euro more attractive to the citizens of the continent. However, Panetta also noted that the design of the digital euro should prevent it from becoming “so successful as a store of value that it crowds out private money and increases the risk of bank runs.”

In a speech at the Elcano Royal Institute in Madrid, Panetta provides new insight into the plans of the European Central Bank for the release of a CBDC.

“The ECB and the European Commission are together reviewing at the technical level a broad range of policy, legal, and design questions emerging from a possible introduction of a digital euro, including the role that legal tender status might play in achieving the desired network effects.”

Fabio Panetta in his speech

However, Panetta also noted that the digital euro must be accessible to all the citizens and very easy to store and make payments. It should be attractive to the users as well, supporting Europe’s autonomy in global payments. The bank seems to have planned a number of policies regarding the digital euro.

European Central Bank Takes Major Step Towards Crypto Adoption- Plans to Trademark “Digital Euro”

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The world of cryptocurrencies has come a long way since the first Bitcoin was first created by Satoshi Nakamoto. From being considered as a fringe asset class, cryptocurrencies were now being integrated into national government frameworks.

Latest reports from the European Central Bank revealed that the body was in the process of trademarking the term “digital euro”. This comes at a time when several governments across the world were also dabbling in creating their own centrally backed digital currencies.

Information from the bank revealed that the trademark application was filed on September 22 with the intent of pushing the digital movement. The bank added that the trademark would facilitate the seamless and safe integration of the digital economy with the current fiat institution. This decision comes on the back of the ECB’s mantra that they need to be plugged into the latest fintech developments.

Christian Lagarde, the President of the ECB has repeatedly been in the news for addressing cryptocurrencies and the way the financial sphere may transform in the years to come. During a recent speech, she said:

“The Eurosystem has so far not made a decision on whether to introduce a digital euro. But, like many other central banks around the world, we are exploring the benefits, risks and operational challenges of doing so. We have a duty to play an active role in balancing the risks and benefits of innovation in payments, so that money continues to serve Europeans well.”

The discussion on digital currency adoption has been ongoing for years now and it is only now that it has received major traction After the report was made public, the cryptocurrency community was filled with a lot of positive reactions. Many believed that the acceptance shown by a traditional institution was just the key required to bring crypto into the mainstream fore. It still remains to be seen how the digital euro will be implemented which will have far-reaching implications on all of the financial space.

 

End Of Libra? European Union Demands Severe Regulations On Stablecoins

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Even though cryptocurrencies were rolled out to veer away from the shackles of centralized institutions, over the years several authorities from across the world have attempted to regulate the crypto industry. The members of the European Union seem to be the latest ones to be making news over the same.

‘Only ECB Is Allowed To Issue A Currency’

In a recent meeting hosted in Berlin, the members of the European Union urged the European Commission to put forward sever regulations for asset-backed cryptocurrencies like stablecoins. The finance ministers of France, Italy, Spain, Germany as well as the Netherlands, released a joint statement refraining the issuance and operations of stablecoins in the bloc. The committee further suggested that these assets shouldn’t be allowed to operate until there is clarity in legality and regulatory hurdles.

Olaf Scholz, the German Finance Minister stated,

“We all agree that it’s our task to keep financial market stable and to ensure that what is a task for states remains a task for states.”

Scholz also suggested that the authorities should move forward with a strict strategy. Banning activities carried out by private sectors in case of failure to meet regulatory conditions should also be part of the authorities’ approach, the German minister added. The European Commission will reportedly put forth regulatory proposals within this month.

French Finance Minister, Bruno Le Maire shared similar thoughts and said,

“We’re waiting for the Commission to issue very strong and very clear rules to avoid the misuse of cryptocurrencies for terrorist activities or for money laundering.”

Back when the social media giant, Facebook was making efforts to roll out the Libra project, it was subject to intense scrutiny by authorities all around the globe. While the project was constantly delayed and is currently on hold, the latest news might have a negative impact on the deployment of the project. Speaking about the same, the French Minister professed,

“The central bank, I mean the ECB, is the only one to be allowed to issue a currency. And this point, it’s something that cannot be jeopardized or weakened by any kind of project including the so-called Libra project.”

Proposed Pan-Europe Crypto and Digital Finance Regulation Framework to Boost Crypto Assets Growth

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According to a recent report by the financial news agency IFC Review, the European Commission, the law-making arm of the European Union, is concluding the first-ever crypto and digital finance regulatory structure proposed by Europe. The pan-European structure is intended to strengthen the development of crypto assets in the long run.

If the regulation is successfully passed into law and implemented, its acceptance would give the best possible legal atmosphere for crypto-related entities to thrive and contribute to the European economy.

Bitcoin and stablecoins recognized as financial instruments

Back in 2019, the Commission spent most of the year deliberating with industry experts and specifying crypto terms. Consultations included the acknowledgement of digital assets such as Bitcoin and stablecoins as financing tools and the development of a regulatory structure for blockchain-based entities.

According to the chairman of the European Blocktech Federation, the recognition of cryptocurrency assets as financial tools established them among the broad group of European and national legitimate tools that oversees Europe’s financial market. Moreover, he termed the upcoming crypto and digital finance laws as ‘historic,’ in regards to the immense potential it creates for businesses and individuals to develop digital finance solutions.

The proposal also elaborated a project to develop a single market for digital currencies, to facilitate cryptocurrency trading across all European nations. By comparison, the plan is the same as the launch of the Euro back in 1999, a single currency that united all members of the European Union back then.

Crypto and digital finance regulatory structure will boost European growth

The new crypto and digital finance regulations follow European Commission’s vice president Valdis Dombrovskis sentiment back in June; regulatory uncertainty surrounding digital assets hinder growth and development in the Eurozone. According to the report, the proposed crypto laws are likely to be enacted in Q3 2020. However, the report notes that interruptions can be expected due to the novel coronavirus disaster. 

Greek Ex Finance Minister Yanis Varoufakis: “Bitcoin will Make Capitalism Uglier, Nastier and More Dangerous for Humanity.”

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In Greece, the former finance minister, Yanis Varoufakis, came forward and voiced his sentiments about the world’s leading cryptocurrency. By an open letter published on July 27, Yanis Varoufakis stated that Bitcoin’s substitution as fiat currency would not be a good idea, since the crypt would only make “capitalism uglier, nastier and more dangerous for humanity.”

Yanis Varoufakis served as Minister of Finance in the Greek Government for a period of five months from January to August 2015. Greece was in charge of the finance ministry and faced a massive financial crisis to the extent that it was unable to provide a €1.6 billion loan from the International Monetary Authority. Nevertheless, the ex-finance minister is now using his experience and knowledge to deliberate on whether bitcoin can replace cash.

Greek Ex-Finance Minister unconvinced by Bitcoin

Through the letter, Varoufakis argues that Bitcoin cannot adapt and react to the many economic problems, citing the novel coronavirus pandemic. He stated that Bitcoin’s monetary policy is programmed; hence it is difficult to alter.

Furthermore, Bitcoin’s scarce supply, which stands at 21 million, is unlikely to change soon anytime. The supply cap coded into BTC ensures that its supply is developed at a steady speed that is automatically slashed every four years by 50 percent. BTC is incapable of adding to its supply; however, experts claim it is an excellent mechanism to curb its supply and maintain value. 

Additionally, Yanis Varoufakis pointed out the uneven distribution of BTC as one of the reasons it should not substitute fiat. According to him, the majority who holds a lot of BTC is not impressed by the idea of adding to their holdings, since this will depreciate the value of their crypto asset. This proves to be a problem since the rich naturally tend to hold onto Bitcoin at the expense of public interest, creating an inadequate wealth distribution and more so during crises such as the COVID-19.

 Varoufakis backs blockchain technology

Although the ex-Greece finance minister believes that the adoption of Bitcoin will make the world worse, he believes that blockchain is an exceptional technology. The former finance minister highlighted while Bitcoin might not be the solution to capitalists, blockchain technology might play a very vital role in developing a new form of the financial system.

Italian Banks Express Desire to Test Digital Euro

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According to the recent report, Italian banks have expressed their desire to explore the European Central Bank Digital Currency. The Italian Banking Association (ABI), composed of 700 financial institutions, wants to accelerate the general implementation of the CBDC, which is backed by the European Central Bank ( ECB).

In regards, ABI has also handed out ten recommendations for a European digital currency during its Thursday announcement. The initial advice, which is the most important, suggests comprehensive complaisance with the appropriate European regulatory structure. On top of this, ABI also suggested financial sustainability as another crucial area.

Digital currencies are beneficial

The association also highlighted some advantages of a CBDC. It noted:

“A programmable digital currency represents an innovation in the financial field, capable of profoundly revolutionizing money and exchange. This is a transformation capable of bringing significant potential added value, particularly in terms of the efficiency of the operating and management processes”.

The development of a central bank cryptocurrency can aid in positioning Italy at a favorable spot to have proper administration of the country’s digital landscape. The features of the digital Euro can offer additional security to the financial system, on top of eliminating the inconveniences related to critical financial transactions like transferring of funds.

Furthermore, digital currencies can help a country achieve a completely cashless economy. This is particularly cost-effective since the cost of developing fiat currencies will be slashed or wholly abolished.

Italian banks dawn of innovation

The announcement highlighted the fact that digital currencies are programmable positions them as crucial innovations in the finance sector. ABI stated that Italian banks believe that the development of digital currencies will immensely revolutionize money and the financial system altogether.

Italy has joined several other countries that have expressed the desire to deploy a central bank digital currency. Early this year, the Bank of France asked the public to submit proposals for the possible experimentation of a CBDC. Furthermore, South Korea also established a panel early this month to research digital currencies. 

European Central Bank to not Release a CBDC Anytime Soon

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Many of those who expected the European Central Bank (ECB) to follow China’s model would be disappointed to hear that the financial institution has no plans to launch a native Digital Currency Central Bank [CBDC]. The official publication claimed that there were several reasons why the CBDC was not needed at this time and provided guidance on the future of the industry.

On May 11, ECB board member Yves Mersch stated that there was no business case for the ECB to launch its own CBDC. He opined that there were bigger concerns in the financial world with the impact of the coronavirus being felt on a daily basis. Proponents of a digital banking future were given a ray of hope when Merch added that the bank would follow up with the industry and work towards it if the need occurred.

Mersch made his comments at a virtual conference where he also touched on the different requirements that the CBDC will have to meet. In his words:

“The lack of a concrete ‘business case’ for a CBDC (Central Bank Digital Currency) at present should and does not stop us from seriously exploring the optimal design of a CBDC so that we will be well prepared should we ever take (that) policy decision.”

He went on to state that much of the money released by central banks are already in digital form. The only difference was that they weren’t CBDCs connected to the virtual asset world. According to him, access to the central bank balance sheet offers access to digital central bank money. Merch confirmed that the ECB was experimenting with the concept of a retail CBDC and would reveal details if and when they were finalized.

The EBC official also talked about the legal and security aspects of the implementation of the CBDC. There are several reasons against the cryptocurrency world, and we need to look at them before we come to a conclusion, Merch said. If token-based digital currencies do not guarantee complete anonymity, the chances of the adoption of the CBDC would be extremely minimal. If a retail CBDC is launched, then it is expected to be based on digital tokens.

A digital token structure would enable the currency to move in a decentralized manner and therefore provide an extra layer of security. The ECB was not the only major bank interested in the evolving crypto field, as shown by the most recent study by the Bank of International Settlements. According to the BIS, most of the world’s big banks have been playing with blockchain or digital assets.

The report concluded that the resources being pumped into the industry were still not sufficient to create the main CBDC platform. Progress may still be hindered as the coronavirus continues to wreak havoc across sectors. Researchers have also shown that the virus has the capacity to mutate constantly, making it harder to fight than ever before.

Conclusion

The introduction of cryptocurrency through traditional industries has been seen as the main focal point for the development of the virtual asset world. Many countries around the world have seen the potential of cryptocurrencies with super-powers like China to establish their own centralized digital currency.

 

 

The French Bank is Planning an Experimental Program on Central Bank Digital Currency

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Several countries have already begun or finished testing their Central Bank Digital Currencies across the world. The French Central Bank has recently revealed that it is looking to test the CBDC for inter-bank settlements. The Central Bank has invited all interested parties to submit their applications.

According to a document published by the Bank of France on 30 March, the Bank invited applications to test the use of a virtual euro. The aim of the central bank is to explore the potential solutions that CBDC can provide to clear and settle digitized financial assets.

CBDC will not necessarily be using blockchain technology

However, despite the Bank of France advocating for blockchain-based solutions to settle payments across the continent before, the bank has claimed that it has not established any particular technology in its proposed CBDC test.

According to the document, ten CBDC-related applications will be selected by the French central bank between firms or individuals. The bank says that this approach would help to create an “innovative nature” as a critical selection benchmark.

In addition, the Bank of France emphasizes, according to another detailed document, that applications should be submitted by persons within the European Union; or in a State Party to the Agreement on the European Economic Area. Interested applicants have to file their applications until May 15, 2020. The selection process of the applications will commence on July 10.

Key objectives of the CBDC testing program

The CBDC testing program focuses on three key objectives, which include forming the CBDC solution for inter-bank settlement; highlighting its benefits; and exploring the potential risks involved. The Bank of France has outlined three CBDC use cases such as payment against financial instruments, as a method of settlement against other CBDCs; and as a method of settlement against cryptocurrencies.

The bank has pointed out that it will not participate in the creation of money during its Central Bank digital currency test program. In addition, the bank has made it clear that the token displaying the figures in Euro in the virtual form will be destroyed after the accounts on which the transactions are settled.

The central bank also stated that it would not apply whichever program at a broad scale. The bank noted:

“These experiments will act as a contribution by the Banque de France to a broader discussion within the Eurosystem, which will make any decision on whether to set up a CBDC. The tests are not intended to be continued on a long-term basis or applied on a wide scale by the Banque de France itself.”

France allegedly plans to issue CBDC by Q2 2020

The Bank of France’s latest CBDC program marks the first time that the Central Bank has been speaking about CBDC since December last year. Bank of France Governor François Villeroy de Galhau back on 4 December last year reported that the bank is planning to begin the pilot phase of the CBDC in Q2 this year.

On the other hand, the deputy governor of the central bank, Denis Beau, has formerly noted that blockchain-based payments; can be used to enhance several payments and financial processes.

In conclusion, back in March, the French market watchdog, the Autorité des Marchés Financier suggested a regulatory sandbox; to test and investigate the potential advantages of using virtual assets within the EU.

 

 

Ex ECB Director General Labels Bitcoin a Ponzi Scheme

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Bitcoin was born at a time when the fragility of the world economy was severely exposed. The world’s most popular cryptocurrency has its own exponents as well as its own critics.

While global Bitcoin proponents believe that the digital currency will deliver financial salvation, their critics, on the other hand, describe Bitcoin as an illusion; and more so, a scam.

In particular, the European Central Bank (ECB) has been a strong advocate of bitcoin and other digital currencies in general. However, its critics are equally huge.

During a recent panel discussion held in Vienna, Austria, ex-Director General of the European Central Bank, Aurel Schubert debated on the most valuable cryptocurrency. He said that within no time bitcoin will only be on display in the ‘Museum of Illusion’. He stated:

“Maybe sooner or later, Bitcoin will be one of those objects on display in the Museum of Illusions. I am sure central banks and also the fiat money, I am convinced it will not be in an exhibition any time soon in the Museum of Illusions.”

Bitcoin sounds like a ponzi scheme

In addition, the former Director-General of the ECB stated that it is clear that the digital market is demanding fast, secure and less costly remittance solutions that are fully available.

In addition, he acknowledged that the available local payment solutions are categorized and do not offer what the global economy actually needs.

Nevertheless, Schubert was of the conviction that the largest cryptocurrency is neither a solution nor a currency. More so, he went on to claim that bitcoin sounds like a Ponzi scheme.

He said that the core of the bitcoin market was on making capital gains. In particular, he questioned the high cost of processing bitcoin transactions.

“But it is clear that the digital market wants and demands some quick, safe, cross-border payment solution available 24/7, and smooth exchanges. We have current local payment solution systems, however, they are not global. They are also compartmentalized, and maybe they are not fit for the globalized economy.”

ECB’s rich history of BTC critics

Indeed, Aurel Schubert’s criticism of the popular digital currency does not come as a rude awakening to the cryptocurrency community. 

The ECB has a rich history of cryptocurrency critics as this is not the first time digital currencies; have drawn criticism from individuals tied to the financial institution. 

Back in 2019, the former president of the European Central Bank; Jean-Claude Trichet lambasted BTC at a panel discussion in Beijing, China. The former ECB executive poured cold water on the digital currency claiming he doubts BTC is the future of money.

Trichet echoed similar sentiments as shared by central banks about the menace that digital currencies pose to traditional currencies. He was worried that cryptocurrencies may disrupt the financial system of the world; decentralize traditional currencies and inhibit central authorities from steering the value of money.

Furthermore, back in September 2019, an ECB board member, Benoit Soeure claimed that the digital currencies could  “challenge the supremacy of the US dollar.”

Regardless of the highly negative sentiments about cryptocurrencies, central banks across Europe are developing digital versions of their fiat currencies.

Countries such as Sweden and Ukraine have developed their own Central Bank Digital Currencies (CBDC). Bank of England’s Mark Carney has recently hinted on the development of a digital reserve currency.