The European Central Bank has released a new document on the digital euro, revealing a major technical analysis of a potential European CBDC and its position in the existing financial system.
The working document released on Friday (13) studied issues such as financial intermediation, payment options and privacy in the digital economy, providing a large number of conclusions based on related algorithms.
The study pointed out that an “anonymous CBDC” is preferable to traditional digital payments such as bank deposits, but “may be supplanted” by digital currencies or payment tokens issued by tech giants.
This risk would be particularly tangible if these platforms compete with banks in the financial services market. However, an option for data-sharing capabilities could result in a general adoption of the CBDC,” the ECB document pointed out.
According to the European Central Bank, one of the main problems with money is that it cannot be used for more efficient online transitions, while still preserving anonymity. A counterpoint also taken by the bank was that bank deposits can be used online but do not provide enough anonymity.
Digital currencies issued by technology platforms allow traders to hide from banks but allow platforms to stifle competition, the ECB concluded. However, the European Central Bank remains enthusiastic about its central bank digital currency (CBDC) project, despite Europeans apparently not feeling very positive about the digital euro.
An independent digital payment instrument, a CBDC, that allows agents to share their payment details with select parties can overcome all friction. The introduction of an anonymized CBDC allows merchants to prevent banks from extracting information from payment flows,” the ECB pointed out.
While the ECB continues to promote the digital euro, with anonymity-enabled features, Europeans are not very optimistic about any CBDC. So much so that public feedback in a consultation on the digital euro, most Europeans show against the adoption of a CBDC in the European Union.
