The European Central Bank (ECB) is considering the infrastructure to deploy its own digital Euro currency as a rival to, as an example, Facebook’s Libra, a draft document from the European Union has proposed.
The statement, intended to be approved by EU member states next month, called on the ECB to take “concrete steps” towards issuing its own central-bank-backed digital currency, known as a CBDC.
Such a coin, which has previously been described as a digital Euro, would compete with lawless cryptocurrencies such as Bitcoin and private projects such as Libra, allowing EU citizens to access some of the benefits of digital money while keeping traditional financial authorities in control.
But France and Germany said in September it posed risks to the financial sector, and backed developing a public alternative. The Association of German Banks published its position on digital currency, saying a ‘crypto-based digital Euro’ should be launched. The entity is considered the ‘voice’ of private banks in the country, and now endorses a blockchain-based or inspired currency.
“The German private banks rate programmable digital money as an innovation with great potential that can be a key component in the next stage of the evolution of digitalization,” the statement reads. The group includes banks such as Commerzbank, Deutsche Bank, FinLeap, and UniCredit Bank among its 200+ members.
Citing a G7 report on stablecoins, the Association outlines how digital money is a requirement for automated internet of things (IoT) payments, customer convenience and cost, and to remain competitive. The banks believe that they, and other European entities, have the means to build and support the use of a digital Euro. But, they need institutional backing first.
The draft European Union text, also urges the bloc to develop a common approach to cryptocurrencies, including possibly banning projects deemed too high-risk.
In its current form, the document – which could be adopted by EU finance ministers next month – would escalate an EU regulatory campaign against cryptocurrencies, which have so far been only partly regulated in some EU states.
“The ECB and other EU central banks could usefully explore the opportunities as well as challenges of issuing central bank digital currencies including by considering concrete steps to this effect,” said the draft, prepared by the Finnish EU presidency and subject to possible amendments.
Digital currencies like Libra – also known as stablecoins – are usually backed by traditional money and other securities, while crypto coins like bitcoin are not. Both are cryptocurrencies.