It seems that the European Central Bank (ECB) is inching closer to digitizing the Euro.
In a Jan. 8 tweet, the ECB asked for public opinion on digital Euro implementation. This form of Euro will be a central bank digital currency (CBDC) under the ECB. The board has been talking about the possibilities of a digital Euro for some time. It is now holding a public consultation on the subject until Jan. 12. The ECB tweet states that,
“Our public consultation on a #digitaleuro is open until 12 January. Give us your views on the benefits and challenges of issuing a digital euro and on its possible design”.
What is a CBDC?
A central bank digital currency, or CBDC, is a digital, centralized fiat currency regulated by a country’s financial body. A CBDC shares some aspects with a cryptocurrency. For example, it will be on a distributed ledger database (although a permissioned one).
Furthermore, it will be easy to use, transfer, and receive on a digital wallet. Moreover, the entire transaction history of the network will be store in a traceable database.
Essentially, it is a cryptocurrency created with the polar opposite vision of Satoshi Nakomoto, but it could enhance usability compared to traditional physical currency systems. If the ECB decided to digitize the Euro, it would be the largest CBDC in the world (until a digitized USD is created).
Implementation has already begun
The ECB may still be pondering on the benefits of a CBDC, but another country has already created and started issuing their own CBDC. Recently, the People’s Bank of China released a CBDC of its own, known as the digital Yuan. The digital Yuan is already being widely accepted among many Chinese online, national, and local retailers. The Chinese government is distributing it. Recently, The CCP held a municipal lottery allowing Chinese citizens from certain cities to win cash prizes in the new digital Yuan. These cash prizes were only available for a limited number of days and to limited retailers until they were revoked. Digitization brings programmable aspects that the CCP can control with their new CBDC.
There are many reasons for China to be on the forefront of CBDC integration. For one thing, China faces being global competition with the US dollar. The US dollar is the strongest currency in the world, so the CCP is trying to innovate and capture some of that value abroad.
In countries with inflation or with unstable fiat currencies, the digital Yuan could be used as much more stable replacement. In many places around the world, having US dollars reserves represents CB stability. The CCP is looking to fight that with their new fiat implementation.