Central bank digital currencies, “only solution” to preserve the monetary system, according to the ECB

The European Central Bank (ECB) has released a new research report regarding Central Bank Digital Currencies (CNBCs). He opposes them to stablecoins, and judges that institutions are the only ones able to preserve monetary stability.

https://cryptoast.fr/numerical-monets-banque-centrales-seule-solution-bce/

ECB studies central bank digital currencies

“Wasteful”, not stable enough, costly… The European Central Bank (ECB) has never hidden his great distrust of crypto-assets. And this, even if it relied on the blockchain to carry out tests concerning its future digital euro.

The institution is indeed playing a balancing act: it is teaming up with a Tezos (XTZ) to see if the blockchain can be useful to it… While shouting out loud when it comes to euro stablecoins. It thus recently wished to have a right of veto on the latter.

A new ECB research report confirms this position with regard to MNBCs. This is based on 150 academic works, and targets especially privacy issues. Regarding consumer expectations, the report points to an apparent inconsistency that extends beyond the restricted circle of cryptocurrencies:

Although consumers tend to rate privacy highly in their survey responses, yet they tend to distribute their data for freeor in exchange for very small rewards.»

The report cites several reasons for this, principally lack of information and knowledges. Hence a concern: will market forces be able to protect the privacy of users, if they are already unable to do so themselves?

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MNBCs, the only “real” alternative to cash?

The ECB report also points the finger the obsolete aspect of speciesconsidered dated:

Since cash is only available in physical form, they […] are not “appropriate” for the digital age. Regulations that aim to maintain their widespread use are likely to incur large economic costs without clear benefits.»

This is a point on which the majority of the crypto community agrees. But the ECB however considers that central bank digital currencies are the only “viable” alternatives to cash. The reason ? Cryptocurrencies are deemed still too unstable and could unbalance the Eurozone, according to the report:

The introduction of digital cash in the form of MNBC appears to be the only solution to guarantee a harmonious continuation of the current monetary system.»

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The ECB fears for the “monetary sovereignty” of the euro, in particular the mixture – which it describes as explosive – BigTech and cryptocurrencies, especially stablecoins. She cites the Terra case as a concrete example of the related risks.

For an institution whose goal is to preserve the euro, this positioning is not really a surprise. One can however wonder if the ECB is aware of the speed at which payment ecosystems evolve. Its digital euro project will not see the light of day before at least 2025. This is particularly late, when other regions of the world already have functioning MNBCs.

👉 On the same subject – A bill on the digital euro should be tabled in the European Parliament for 2023

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Source: European Central Bank

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