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European Central Bank Proposes Digital Euro Design Options

European Central Bank Proposes Digital Euro Design Options

January 09, 2023585 view(s)

The European Central Bank (ECB) proposed a series of design and distribution options for a digital Euro. The proposal lays out how  the Eurosystem and banks would issue, distribute, and settle transactions using the proposed central bank digital currency (CBDC). The latest proposals are in the recent progress report the ECB filed on a two-year digital Euro investigation project commenced in July of 2021. The investigative phase consists of many components including five separate tests with major banks and retailers like Amazon. Read the entire progress report here.

What’s in the proposal?

 The ECB's movement toward a CBDC has been years in the making. In 2020, the ECB released a 54-page report detailing reasons a digital Euro is needed. Read the full 2020 report here. In July 2021, the Governing Council launched a two-year CBDC investigation phase ending in October 2023. After the investigation, the Governing Council may institute a realization phase to test technical solutions and business arrangements for a digital Euro. The progress report begins by describing the history of the investigation. The graphic summarizes the significant developments and planned timeline of the investigation phase.

 The proposal lays out different design formats to address different types of transactions. The types of transactions discussed are peer-to-peer, online validated by third parties, and online validated by peer-to-peer. Most of the progress report discusses who will handle the different transactions, but it does address the next steps. The following steps will be continued collaboration with multiple stakeholders, and definitive decisions being made in October by the Governing Council. 

The ECB stated, “A number of steps will need to be taken before a digital Euro can be introduced, including analysis of how financial intermediaries could provide front-end services that build on a digital Euro, how digital Euro would be distributed to users and how payments would be settled.” The ECB is still at least a year from releasing a CDBC but is diligently working toward that end.

What does it mean?

The ECB may be far from releasing its CBDC, but many countries are close. Roughly 90% of central banks are developing a CBDC . Nigeria already has launched its CDBC and is limiting cash withdrawals to promote CBDC usage. Partnering with the Bank of International Settlements (BIS), UAE, Thailand, and Hong Kong, China recently completed the most extensive cross-border test. The U.S. is currently testing accounting software and plans to test a payment processor called FedNow in May. The emergence of digital currencies has rapidly advanced since the pandemic and the sanctions placed on Russia. Many businesses were looking for contactless payment solutions, and governments wanted more manageable ways to pay stimulus to their citizens. Chinese economist Shuang Ding said, "the perceived threat from the U.S…has made RMB globalization more of a necessity than a luxury to ensure economic and financial security." Whether you like it or not, CBDCs will be our reality soon. Read this quote from the progress report on what people expect concerning converting a CBDC into central bank money. The ECB is almost perfect in its assessment except for one crucial point, making the statement the perfect expression of the lie.

“By providing a monetary anchor, central bank money plays a key role in maintaining a well-functioning payment system, financial stability, and ultimately trust in the currency. This in turn is a pre-condition for preserving the transmission of monetary policy and hence for protecting the value of money.” 

The ECB thinks the fiat money it creates is essential for financial stability, trust in the currency, and protects the value of money. The Dollar has lost more than 80% of purchasing power since being removed from the gold standard. Losing more than 80% of purchasing power doesn't make an excellent case for a fiat currency to anchor the financial system to bring stability. However, you may feel differently. Does the fiat Dollar make you trust the currency and feel the system is stable? If so, there is no good reason to protect yourself with precious metals. However, suppose you think fiat currencies are a danger to sound money. In that case, you should protect yourself from the lies created at Jekyll Island. The U.S. CBDC will have significantly less privacy than the ECB CBDC, and it is coming soon. If the ECB would have said, “By providing an anchor, physical gold plays a key role…”, it would have been the most honest statement ever made by a banker. Instead, it is a lie being used to justify CBDCs. The choice is yours. Option number 1: you can go along with the bankers and pretend fiat currencies are the anchor of a well-functioning payment system. Option 2: Acknowledge that every fiat currency in history has eventually collapsed, and gold has been real money for thousands of years. 

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Ryan Watkins, Op-Ed ContributorbyRyan Watkins, Op-Ed Contributor
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