• The European Central Bank (ECB) is researching the potential of a single central bank digital currency (CBDC).
• Representatives from private and public banking institutions share their opinion on the digital euro.
• Issues such as anonymity and competition with private banks are being discussed.
Potential of a CBDC in Europe
The European Central Bank (ECB) is researching the potential of a single central bank digital currency (CBDC). This idea has been met with mixed reactions from various stakeholders in the European Union. Representatives from both private and public banking institutions have shared their views on the matter, discussing issues such as anonymity and competition with private banks.
Three Use Cases
Evelien Witlox, program director for the digital euro at the ECB, lays out three use cases that are prioritized by the ECB: person-to-person payments between individuals; consumer-to-business payments including e-commerce and physical purchases; and payments to or by government entities. These use cases could potentially threaten traditional banks’ business models by competing with their collection activity and disrupting their financing capacity, according to Jerome Grivet, deputy CEO of French bank Crédit Agricole.
Competition With Private Banks
Burkhard Balz, member of the executive board at Deutsche Bundesbank, shares Grivet’s sentiments that it is essential for national central banks to avoid extending their footprint too much in order for private sector intermediaries to be involved in distributing the digital euro. He goes further to emphasize that these intermediaries should explore economic potentials rather than just seeing this as an obligation they must fulfill.
Customer Reactions & Adoption Rates
It is difficult to predict how customers will react to this new form of central bank money or how much public adoption there will be, according to Grivet citing Chinese digital yuan adoption rates as an example. To address this concern, Witlox promises that customer data collected through usage of the CBDC would not be shared with third parties nor used for surveillance purposes.
Overall there are many considerations that must be made when creating a CBDC such as user privacy and economic incentives for intermediaries while still maintaining efficient distribution methods without relying too heavily on traditional banking systems. While more research needs to be done before any final decisions can be made, it seems like all parties involved agree that customer data collected through usage of the CBDC would remain secure while users maintain full control over personal information.