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ECB acknowledges that the digital euro will not be superior to Paypal, Visa or Mastercard

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Key facts:
  • Without the value reserve function, it will be difficult for CBDC to compete with bitcoin.

  • Europeans remain divided on the development of the digital euro.

Members of the European Central Bank (ECB) admit that the digital euro will only serve as a means of payment for EU countries and so far has not proven to be more useful than other systems such as Paypal, Visa or Mastercard.

In a paper published on the ECB’s official website, a group of bankers analyze the characteristics of the central bank’s digital currency (CBDC), taking into account the progress made by the institution.

In this regard, the written signed by Ulrich Bindseil, Piero Cipollone and Jürgen Schaaf states that, according to the specifications proposed by the ECB and the European Commission, the digital euro “would combine all the features of a modern digital payment solution.”

However, individual availability of digital euros will be limited.. “Merchants will be able to receive and process digital euros, but will not be able to hold them.” This is to protect the corporate deposit base of the banking system.

Thus, everything suggests that the CBDC will serve only as a means of payment, without performing the other functions of the currency. A project that resembles what has been done in China with the the digital yuanand tries to avoid counter runs.

“Digital euro deposits do not accrue interest,” the bankers added, explaining that users could link the digital euro to an account at their bank, which would allow for a “reverse cascade” mechanism.

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“This eliminates the need to pre-fund the digital euro account for online payments, as any shortfall would be immediately covered by the linked corporate bank account, provided it has sufficient funds,” the ECB says.

All indications are that the ECB’s plan is to process payments more efficiently. And to break with BigTech’s dependencies. and payment giants such as Apple, Google, PayPal, Visa or Mastercard. Bitcoin (BTC) is not explicitly included in this list.although it is known, based on statements made by bodies such as the Bank for International Settlements, that the idea is also to de-emphasize cryptocurrencies.

Even so, without the value reserve function, it will be difficult for the European CBDC competing with the BTC. This is despite bankers’ promises that the digital euro “will have pan-European reach, legal tender status and a high level of privacy.” But it will be a form of payment controlled by states, the ECB publication acknowledges:

It would fill the void left by the absence of a European electronic payment solution freely available and accepted throughout Europe, thus strengthening monetary sovereignty and the resilience of the monetary union.

It is a prospect that has generated controversy in Europe, the United States and other countries around the world.

As CryptoNews reported, the debate has divided public opinion between those in favor and those against of this type of project, which are now more than 100 around the world. The main fears are about loss of privacy and increased state control over citizens.

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