Tag: Digital Euro

ECB Nears Final Stage of Digital Euro Investigation

by Blockchain News

During a recent hearing with the European Parliament’s Committee on Economic and Monetary Affairs, Fabio Panetta, who serves on the Executive Board of the European Central Bank (ECB), offered a comprehensive briefing on the status of the digital euro initiative. This update arrives as the ECB is wrapping up its investigative phase, laying the groundwork for the Governing Council to determine the next steps for the project.

Key Legislative Proposals

In June, the European Commission introduced a single currency package, including legislative proposals on the digital euro and the legal tender status of cash. Panetta stated that these proposals “create a new paradigm for preserving monetary sovereignty while guaranteeing people’s freedoms in the digital age.” The measures aim to ensure that Europeans can choose between cash, digital euro, and private digital means of payment for their everyday transactions.

Legal Tender Status and Accessibility

One of the pivotal aspects of the legislative proposal is the legal tender status of the digital euro. This would grant people the right to access and pay with digital euro through their current banks, without the need to switch financial institutions. Panetta emphasized that “everybody would be able to use their digital euro whenever and wherever they want to, throughout the euro area.”

Privacy and Data Protection

The draft legislation also focuses on privacy and data protection. According to Panetta, the Eurosystem would not have access to personal details of digital euro users or connect any payment information to private individuals. The digital euro would offer “cash-like privacy,” allowing payments to be made offline.

Pricing and Financial Stability

The Commission’s proposal strikes a balance between public and private sector pricing objectives. Basic services of the digital euro would be free for end-users, while intermediaries would be compensated similarly to existing private digital payment methods. Panetta also noted that tools like holding limits would be designed to maintain financial stability and prevent undesirable consequences for monetary policy.

The Road Ahead

The ECB is currently preparing its opinions on the legislative proposals and will report on the findings of its investigation phase next month. Panetta reiterated that a decision to issue a digital euro would only be made after the legislation is adopted.

Implications for the Financial Sector

Panetta warned against the risks of leaving digital payments entirely to the private sector, citing PayPal’s recent decision to launch its own US dollar-denominated stablecoin. He argued that a digital euro would offer a public alternative, mitigating the risks of potential monopolistic behavior in the digital payments market.

Conclusion

As the ECB’s investigation phase comes to a close, the future of the digital euro hinges on legislative decisions and ongoing dialogue with stakeholders. The project aims to make the euro fit for the digital age while preserving monetary sovereignty and individual freedoms.

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Fake Video of ECB President Lagarde Admitting to Digital Euro Control

by Blockchain News

A video of European Central Bank (ECB) President Christine Lagarde has been making the rounds on social media, with many believing it to be real. In the video, Lagarde appears to be admitting that a digital euro will be used to control payments in a limited manner. However, it has since been revealed that the video was a fake.

The video was initially shared by the breaking news account Watcher Guru on April 6, and it generated a significant amount of social media chatter. In the video, Lagarde is heard saying that she does not want to rely on an “unfriendly countries currency” or a currency provided by a “private corporate entity like Facebook or like Google.” She goes on to say that she is “personally convinced that we have to move ahead” with the digital euro.

It has since been revealed that the video was taken from a prank video created by a group of individuals who have had similar conversations with other public figures. Harry Potter author J.K. Rowling and former United States President George W. Bush have also fallen victim to similar hoaxes.

The ECB has not yet announced any concrete plans for the development or implementation of a digital euro. However, the idea of a central bank digital currency has been gaining traction in recent years, with many countries exploring the potential benefits and drawbacks of such a system.

A digital euro could potentially provide a number of benefits, including increased financial inclusion, lower transaction costs, and greater security and privacy. However, there are also concerns about the potential risks and challenges associated with such a system, including the possibility of cyber attacks and the need to balance privacy concerns with the need for transparency and accountability.

In light of the recent hoax video, it is important to exercise caution when consuming news and information online. Misinformation and fake news can spread quickly, and it is important to verify the authenticity of sources and information before sharing or acting on it. The ECB has not made any official announcements regarding the use of a digital euro, and any news or rumors should be taken with a grain of salt until confirmed by credible sources.

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Digital Euro May Have Transaction Limits for Retail Users

by Blockchain News

With the European Central Bank (ECB) now developing the prototype for its Central Bank Digital Currency (CBDC) otherwise known as the Digital Euro, more details are now surfacing based on its potential operational dynamics.

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Speaking recently at the “Towards a legislative framework enabling a digital euro” conference hosted by the European Commission (EC), Fabio Panetta, a board member of the ECB said the bank may impose some restrictive limits on transactions for the retail individual users.

While Panetta acknowledged that the ECB has not made any final decision on what the limit will be, he said €3,000 is a good example of a limit the bank can impose on the Digital Euro as a store of value. He went on to say that the total number of transactions that can be done by individuals may also be capped at 1,000 per month.

“If we give access to a means of payment, which is relatively limited, there are no transaction costs because you only need to have a smartphone,” Panetta said, “There will be risks that people could use this possibility to move, for example, their deposits of other banks or their money out of financial intermediates.” 

The ECB board member also highlighted on an important subject regarding the Digital Euro and how it will co-exist with fiat. According to him, both versions of the Euro will complement each other to make for a robust financial ecosystem within the bloc.

“Digital euro would be an additional option for retail payment — not a challenge to the function of the financial system,” he said confirming that the new money is not designed to replace cash, a position that echoes similar words from ECB President Christine Lagarde.

Other Central Banks have maintained this position, noting that their CBDC will not displace cash nor make them obsolete. This argument brings a lot of doubt considering the wide embrace of people to the digital economy and the financial evolution which has largely relegated cash in some countries.

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ECB Advisor Defends Amazon’s Role in Digital Euro Project

by Blockchain News

Jürgen Schaaf, an advisor to the Senior Management of Market Infrastructure and Payments at the European Central Bank (ECB), on Wednesday defended the EU’s decision to make Amazon one of the five firms to test a digital euro.

“The prototyping experiments for the front end are driven by technological considerations. The companies that have been chosen for that five were the most appropriate in terms of the needs that we have for technological tests and experiments,” Schaaf stated in a panel discussion hosted by the Association for Financial Markets in Europe.

Earlier this month, the European Central Bank selected five companies to help develop user interfaces for a potential digital euro.

The companies include the US e-commerce company Amazon, Spanish multinational CaixaBank, French payments platform Worldline, Italian payments-focused bank Nexi, and EPI (European Payments Initiative), a consortium of euro-area banks. The five firms were picked from a pool of 54 potential companies that responded to an ECB call for participants.

Each of the five companies is tasked with focusing on one use case of the digital euro. Amazon is expected to test the application of e-commerce payments. CaixaBank has been assigned to develop a mobile app that simulates the steps users will take to transfer digital euros to their bank accounts. Worldline will explore offline payments between individuals. And lastly, EPI and Nexi will work on point-of-sale retail payments.

The ECB said the purpose of the prototyping exercise is “to test how well the technology behind a digital euro integrates with prototypes developed by companies.” The bank aims to simulate transactions in a real-world environment, and all transactions will be processed using the Eurosystem’s interface for a realistic experience.

While Amazon’s task involves developing eCommerce payment prototypes, Schaaf told the panel the results of this work would not automatically feed into the follow-up experimental phase. This suggests that Amazon may not continue to have favored access, according to the report.

However, Schaaf admitted that he did not want to see a “political” exclusion of U.S. companies in the digital dollar project. The U.S. retail giant Amazon was one of five companies selected by the ECB to develop a user interface for a potential digital dollar earlier this month.

“Our wish to strengthen our monetary autonomy with a digital euro does not mean that Europe would shut down all its gates for retailers from abroad,” Schaaf said. “There’s no protectionist intention behind that.”

The digital euro project moving forward

In April, the ECB invited fintech firms to apply for the prototyping exercise, and 54 firms expressed their interest. Last week, the ECB narrowed down the list to five companies based on the specific capabilities in the chosen areas in the prototyping exercise.

The developments show that the digital euro is making significant progress though the ECB is adopting a cautious process. The simulation exercise is part of the investigation stage to determine the viability of a regional CBDC that started in October 2021 and will come to an end in October 2023.

At the end of the two-year exercise, the ECB will decide whether or not to start developing a digital euro. The investigation involves the central banks of all participating nations and interested private companies sharing opinions on the proposed direction of the process.

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Digital Euro Would Not be Used for Commercial Purposes: Christine Lagarde

by Blockchain News

Christine Lagarde, the President of the European Central Bank (ECB), has given her word that the proposed Central Bank Digital Currency (CBDC) for the region dubbed the Digital Euro will not be used for commercial purposes. 

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Speaking at an event in Frankfurt on Wednesday, Lagarde reiterated that the ECB is not designing the Digital Euro in a way that will make it easy for users’ data to be collected and commercialized. Lagarde said the ECB is not in the business of commercializing users’ data, assuring stakeholders that privacy will be a frontline focus for the bank.

The ECB boss cited the data from a survey conducted by the bank back in 2021 in which respondents cited privacy as a major feature they would like to see in a Digital Euro.

With the Digital Euro billed to make a complementary cushion to cash as a payment tool within the EU, Lagarde noted that the ECB is offering “the guarantee that those payments will not be exploited for commercial purposes” and that commercializing a CBDC is typically note “..the business of a central bank.”

With the promise that the Digital Euro, which is currently slated for pilot tests next year, will protect citizens, Lagarde noted that it will be another banknote with a little less anonymity. Most central banks, including the United States Federal Reserve, have highlighted the fact that their CBDCs will be designed with a visible focus on privacy. 

The race to develop a CBDC is one that is now frontline for central bankers who are pushing to stem the dominance of crypto, including Bitcoin and stablecoins as payments. According to the International Monetary Fund (IMF), as many as 100 countries are currently well invested in launching a CBDC.

The race to control central banks’ financial and payment landscape through the launch of a CBDC gained momentum over the past few years, a time within which the Bahamas and Nigeria have both launched a functional digital fiat currency.

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European Central Bank Considers Rolling Out Blockchain-Powered Bank Transactions

by Blockchain News

The European Central Bank (ECB) seeks to be ahead of the game by studying how blockchain-based bank transactions will enable more money control even if lenders change to distributed ledgers.

Fabio Panetta, an ECB board member, pointed out that it was fundamental to avert a situation where liquidity and trading would become fragmented if banks were allowed to settle amongst themselves or utilize stablecoins. 

Panetta added:

“Despite the uncertainties surrounding DLT’s potential, we want to be prepared for a scenario where market players adopt DLT for wholesale payments and securities settlement.”

Market participants can use distributed ledger technology (DLT) to verify transactions since a copy of them is kept rather than depending on a trusted party like a central bank. Per the report:

“On top of a digital euro for consumers, the ECB is looking at how it could let banks settle wholesale transactions between them on a distributed ledger, rather than the central bank’s own.”

Based on the popularity of cryptocurrencies like Bitcoin (BTC) and the underlying blockchain technology, the ECB is one of the global central banks eyeing digital currencies.

For instance, the ECB launched a public consultation on the proposed Digital Euro, Blockchain.News reported. 

On the part of stablecoins, Panetta disclosed that they could jeopardize monetary supremacy. He said:

“Giving stablecoins the ECB’s backing would outsource the provision of central bank money to private entities, endangering monetary sovereignty.”

Panetta added that the ECB sought solutions to bridge the gap between its Target 2 settlement system and private blockchains. 

Meanwhile, the ECB raised interest rates by 50 basis points (bps), which brought its deposit rates back to zero from -0.5% in July. The hike was a surprise move as economists had anticipated a smaller hike of 25bps.

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Jeff Bezos Amazon Among 5 Partners to Design Digital Euro Prototype

by Blockchain News

The European Central Bank (ECB), has confirmed Jeff Bezos’s tech company AMAZON,  as part of the five partners to design a digital euro prototype. 

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ECB said via a post on its website, that the selected organizations will perform different functions in developing the interface of the virtual euro prototype. 

Notably, ECB began to look into the digital euro back in July 2021, however, it made no guarantees that it will eventually issue the virtual currency. While stating that only a digital euro that is generally recognized by European users could be deemed an achievement.

Based on recent developments, ECB has planned for the prototype exercise to commence in September and reach an end in December. 

Similarly, this exercise will form part of a continuous two years study phase, to analyze the prototypes designed and to assess the effectiveness of the partnership. ECB forecasts completing this cycle by March 2023.

ECB sets Responsibility Based on Unique Capabilities

European Central Bank directors revealed that the five organizations will prioritize specific roles unique to their capabilities. Leading e-commerce firm, Amazon will be assigned the duty of designing the eCommerce payment system for the project. 

While other organizations were chosen from 54 applicants that met the requirements required to design the features of the currency. Spain’s CaixaBank, will design the online peer-to-peer payment for the App, and French global payment service, Worldline will design the offline payment system.

Recall that ECB announced a call for partners back in April and received 54 applications from both international banks and Multinational Technology Companies. 

Therefore, the five applicants that were selected were based on their adherence to “specific capabilities” necessary to carry out the demands of the project. Again, the ECB applauds the 54 Applicants across the globe that showed interest in designing the prototype.

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ECB Officials Urges to Accept Digital Euro in Brick-and-Mortar Stores

by Blockchain News

Fabio Panetta, a member of the Executive Council of the European Central Bank (ECB), suggested an acceptance of the digital euro in brick-and-mortar stores and online entities to help promote the use of the fiat digital euro.

A digital euro needs to allow easy payments between people if it follows a trend of adoption like the fiat euro 20 years ago. A nominal survey showed in a statement released on Wednesday. And the masses are more receptive to the digital euro, which is widely accepted in various brick-and-mortar and online stores.

Panetta said:

“The introduction of euro banknotes made it possible for us to pay with physical euros anywhere in the euro area. So it is no surprise that people expect to be able to use the digital complement to banknotes wherever they can pay digitally or online.”

In April last year, The European Central Bank (ECB) has published its public consultation results, an initiative launched last year to evaluate Europeans’ stance regarding a central bank digital currency (CBDC) backed by the European Union.

The majority of the respondents, including private citizens and professionals, want a digital Euro, but only if it can be built with elements of privacy.

Fabio Panetta said the ECB would hold another round of focus groups on the digital euro by the end of 2022, adding that:

“We are getting a clearer picture of what citizens and merchants want, so we can finetune all the design features of a digital euro before any potential issuance. And co-legislators have a key role to play, for instance to enable greater privacy.”

The ECB is amongst the major monetary watchdogs with a vested interest in the Digital Euro pursuit. The ECB President Christine Lagarde has often reiterated the bank’s plans to launch the CBDC to serve as a complementary digital payment alternative to relieve the existing fiat Euro alternative.

Other economies, including Japan, China, and Sweden, are also exploring the Digital Currency initiative across the board.

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Central Banks of France and Switzerland announce successful trial of digital Euro, Swiss Franc

by Cointelegraph

On Wednesday, the Banque de France (BdF), the BIS Innovation Hub (BISIH), and the Swiss National Bank (SNB) announced the success of a pilot run of a wholesale central bank digital currency (wCBDC), titled Project Jura. The project aimed to investigate cross‑border settlement with euro and Swiss franc wCBDCs, and launched on a third‑party distributed ledger technology platform.

The experimental technology explored in Project Jura first consisted of a decentralized peer‑to‑peer network of computer nodes (Corda) to validate transactions while simultaneously ensuring that all legal, regulatory, and business rules of governing nations are satisfied. Then, there was the tokenization of the aforementioned fiat currencies and the Negotiable European Commercial Paper, a short-term maturity (one year or less) debt instrument denominated in euros. Finally, Project Jura looked into infrastructure networks enabling real‑time gross settlement of transactions, bond digitization, and a digital assets registry.

Although the trial was successful, it does not guarantee the issuance of a wCBDC by Swiss, French, or European Union authorities. The report concluded that, “wCBDCs could be incorporated into novel settlement arrangements that could change the structure and functioning of capital markets, money markets and foreign exchange markets,” saying that:

“Broadening the use of central bank money through wider access or increased cross‑border settlement could catalyse these changes, as could deeper integration of currencies with other digital assets and securities.”

Experimental Architecture of Digital EUR/CHF | Source: BISIH