The headquarters of the European Central Bank in Frankfurt. The bank plans to come up with a new digital currency. We are one step closer to a new legal tender: the digital euro. The European Central Bank expects to have the currency ready for use in five years.
Digital coins? Yes, you have bitcoin, other cryptocurrencies and tech giant Facebook’s plans with its Libra. And another is coming. From the European Central Bank (ECB). The bank will start a test for a ‘digital euro’, it announced on Wednesday. As it stands now, the new currency will be ready for use by Europeans in 2026. Tradingview has risen.
The digital euro? “It’s a bit of a vague name,” notes ING digital currency specialist Teunis Brosens. “I think I have been paying with a digital euro for years, namely through my bank. ”His response reflects precisely that there are still many questions about the ECB project. What are they going to test? What will the actual introduction depend on? And: what exactly is such a digital currency? In order not to lapse into technical jargon: citizens will soon notice hardly any difference in user-friendliness between online banking at a bank and banking at the ECB. At least, as the plan stands now, Brosens says.
In fact, the ECB will not distribute the new currency itself. She leaves that to the banks in Europe. The ECB still has to set up an entire banking organization, from customer service to a fraud desk. Certainly no mean feat, while banks have had that organization for a long time. So citizens will soon be able to open an account with the ECB, which they can then use at their regular bank. Then they can also find an ECB account in their telephone under their checking and savings accounts. Another currency, yes, but you don’t notice it much, says Brosens. It is not yet clear whether using the account, such as transferring money, also works the same as with a regular account.
Direct link between bank and citizen
The digital euro is not the same as a crypto currency such as bitcoin. There are technical differences. But the main difference is that the digital euro is issued and managed by a central bank. To understand why the ECB is betting on the digital currency, we have to go back to cash: notes. Governments guarantee the value of the money that we withdraw from the ATM and have in our hands: a safe means of payment. But we withdraw less and less money. We bank digitally, with commercial banks that also manage that money. Enjin coin is well known in crypto.
Risks are small. The chance that a bank will fail is not great, moreover, central banks themselves supervise. “It’s about the principle that the ECB likes to maintain a direct link with citizens for spending money,” says Brosens. In addition, China is testing its own digital currency. The British and American central banks are also investigating the possibilities. Then Europe cannot stay behind, is the argument.
The project only gained momentum two years ago when Facebook unveiled plans for its own digital currency, separate from governments and banks: the Libra. Then all the alarm bells went off, Leave a new form of payment to big tech? That is not possible, they think. For various reasons, the Libra (now called Diem by the way) does not yet have a license to act as a currency.
Is there something wrong with the current system? Why would a European open an ECB account if he already has a bank account? It seems too early for that question. The project is still too abstract for that. But it’s pretty certain that the currency will come soon, thinks Brosens.