As of the end of 2020, the European Central Bank (ECB) has reiterated that it is at the exploratory stage regarding the creation of a digital euro. A decision on the advisability of such a creation should fall in June 2021. Somewhat belatedly, the European Central Bank has just made an official announcement on the matter.
A digital euro will be created.
The next step of the project consists of a 24-month investigation phase that should allow, according to the European Central Bank, " address key design and distribution issues „.
European Central Bank enters the battle for CBDC, dominated by China
The European Central Bank thus enters the race to create a CBDC (Central Bank Digital Currency), which China largely dominates. China has been actively working on its digital yuan project for several years. This project is quite advanced as it is currently being tested in several major Chinese cities.
Xi Jinping wants China to seize first-mover advantage in this new field . The goal is to be able to challenge the hegemony of the US dollar on a new playing field. De facto, the other major world economic powers will have to react in order not to leave China alone in this area.
The European Union will therefore join the battle, while the US is still in the process of discussing the possibility of creating a digital dollar. However, it seems obvious that the Fed will eventually move in this direction as well.
This big announcement from the European Central Bank should not make us forget that the reality of the digital euro is still far away. It will be at least 5 years before it is available to European citizens. This means that other countries are already significantly behind China.
The ECB has not yet decided on the implementation system, but claims it will be better than bitcoins in terms of environmental impact
In the European Central Bank's press release, it seems that the institution is still dithering over the best technical solution for implementing this digital euro.
The first solution would be to use the Eurosystem's TARGET Instant Payment System (TIPS). A second solution, also under consideration, would be blockchain. The ECB's aim is to rely on a solution that " capable of processing more than 40 000 transactions per second ". However, the ECB does not say which existing blockchain solution it could use for this digital euro if TIPS is not retained.
The ECB can then boast of being able to create a system that would be better than bitcoin in terms of environmental impact:
"Our experimental work has also shown that the energy needs of the infrastructure will be negligible compared to the energy consumption and environmental footprint of cryptoassets such as bitcoin."
This allows the ECB to step into a breach opened by Elon Musk in May 2021, when he explained that Tesla was ending support for bitcoin payments due to the environmental impact of the cryptocurrency king.
The ECB (deliberately) forgets to specify that its digital euro will be centralized and that it will not be able to compete with what Bitcoin offers people
The ECB is careful to explain to the general public that its goal is completely different from bitcoin.
Bitcoin is a transparent and decentralized system that returns energy to each of its users. Its supply is limited by 21 million units, and its programmatic monetary policy gives incredible guarantees to users. Furthermore, no one can censor you if you use the bitcoin system.
The digital euro will address none of these issues.
The system the ECB chooses will necessarily be centralised. The euro can still be printed out of thin air in unlimited quantities, while the ECB will have even greater control over every transaction made by European citizens.
Greater control will obviously increase the censorship power of EU governments.
In short, this digital euro will strengthen the society of mass surveillance that is emerging around the world. It seems that the Chinese model, although rejected by Westerners, is giving ideas to European policymakers.
Final thoughts
For my part, it is clear that this is a big NO. This will inevitably disappoint the ECB, which seems to imagine that European citizens are eagerly awaiting such an instrument.
I do not intend to use such a tool to further compromise my privacy. Bitcoin, which has already existed for more than twelve years, is a much better option than the digital euro. So there is no need to get excited about such an initiative.
We already have a much better deal with bitcoins, which gives us the freedom to live our lives on our terms .