"Hardly any added value recognizable" – German blockchain association criticizes EU plans for the digital euro

• The ECB plans to introduce the digital euro in the coming years
• The German Blockchain Association criticizes the lack of a decentralized infrastructure for the digital euro
• Federal bloc calls for the use of blockchain technology and risk minimization

The European Central Bank (ECB) is working flat out on a digital version of the euro. The e-Euro is intended to simplify European payment transactions, save on transaction fees, reduce the cost-intensive printing of physical money, prevent criminal money flows and create new business opportunities for fin-tech companies and Industry 4.0. That sounds extremely promising – but the German blockchain association Bundesblock comes to a sobering interim result after a detailed investigation.


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The German Blockchain Association sees hardly any advantages in the digital euro

In a 20-page position paper, Bundesblock goes into detail about the current status of the ECB’s preparations for a digital euro. Even if potential advantages of the digital common currency are highlighted (increased security, various usage functions such as e-commerce and peer-to-peer payments or lower costs), the Blockchain Federal Association is disappointed with the developments to date. “In the current form, it is difficult to recognize the added value that goes beyond what has been possible with bank money for decades,” reads the federal bloc ruling. In addition, there are high risks – in addition to the danger that the e-euro will not be accepted by the population, the authors of the position paper also emphasize data protection risks and technology risks. In addition, small to medium-sized banks and savings banks could suffer from the digital euro, since replacing bank money with the digital euro would result in lower fees (e.g. when processing SEPA-instant payments) that these smaller finance houses depend on.

Federal bloc calls for these changes

In its position paper, the federal bloc not only denounces it, but also presents its own suggestions for improvement. First and foremost, a stronger inclusion of blockchain technology should be mentioned. The lack of a blockchain basis for the planned e-euro is also the association’s main point of criticism: “From the point of view of the federal block, the digital euro should use the advantages of blockchain technology in order to be able to map new use cases,” emphasizes the position paper. “Only if the digital euro is based on a decentralized infrastructure can companies from the much-cited Industry 4.0 process the necessary payment transactions. There is also potential for the emergence of new start-ups that could build a business model on the basic technology of the ECB. ” The ECB is missing out on these opportunities due to the excessive centrality of the digital euro, which by definition rules out the use of the decentralized blockchain.

In addition, the association sees a considerable need for improvement in terms of risk minimization. “The risks must be minimized. In particular, it is important to protect the privacy and data protection of citizens. Without the use of blockchain technology, the risks outweigh the opportunities of the digital euro.” The association’s final verdict is correspondingly harsh: “If the digital euro is not built on a decentralized infrastructure such as blockchain or distributed ledger technology, it must be rejected.”

CBDCs: mega trend or much ado about nothing?

CBDCs are polarizing: Some proponents are hailing central bank digital currencies as the foundation for a sheer revolution in payments and banking monetary policy. As a result of the digital euro, criminal activities would be prevented, transaction costs would fall and money transfers would be more convenient. Skeptics oppose this and see CBDCs as a means used by central banks to further extend their power over citizens – to the detriment of decentralized cryptocurrencies such as Bitcoin or Ether. In connection with this, the CBDC drafts are accused of a lack of data protection. Similar to the German Blockchain Association, many experts doubt the actual use of an e-Euro.

Nevertheless, the comprehensive, international introduction of the digital central bank currencies seems to be only a matter of time. Dozens of central banks have already reported significant progress in the implementation of CBDCs, most recently the Chinese government has already tested its e-Yuan in the city of Changshu. However, digital currencies that have already been introduced, such as the e-Naira in Nigeria, show that widespread use of the respective digital money is by no means a matter of course: According to BTC ECHO information, only 0.5 percent of the Nigerian population has used the e-Naira, although the Nigerian Government wanted to make its use more attractive by means of various incentives. The question, much discussed in crypto circles, as to whether the CBDCs will act as a competitor, as a supplement or just as an unattractive and hardly noticed accessory to Bitcoin, Ether & Co., remains unanswered.

Editorial office finanzen.net

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