The Association of German banks has written a paper requesting for a universal digital currency across the Eurozone. The banks argue that Facebook’s Libra poses questions towards the future of the global monetary system and its shapers.
Furthermore, the banks believe that it is the role of the policymakers and central banks to address concerns of the future design of the monetary system.
The request for a uniform digital currency comes after Facebook planned to launch Libra, the world’s first global digital currency. The European digital currency will help fill in gaps that Libra poses, such as differing legal requirements.
Similarly, the Association believes that nations should not compete with private currencies (such as Libra) as it endangers sovereignty.
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“The provision of crypto-based digital money must not, therefore, endanger the stability of the existing monetary system.” Argues the Association.
Nevertheless, the banks argue that it is inevitable that innovations and digital change will transform the global economy; therefore, the urge to have a Eurozone Digital currency.
Characteristics of the Proposed Digital Currency
One of the traits of the proposed digital currency is that it will be programmable. The money will allow automated transactions based on the terms stated by transacting parties. For instance, say if John is buying a Car from Janet where the purchase requires payment after delivery, the money will only change hands after confirmation of delivery.
In this regard, the banks will provide a programmable account with a crypto-based digital euro. As such, the account will allow for interoperability with book money i.e., bank balances in real-time. Such conveniences will feature cryptography and tokenization technologies, making the data almost impossible to hack. The success of the programmable account will mean instant transactions across parties as they will be no need for an intermediary.
The programmable digital money will require compliance with specific regulatory frameworks to promote public trust. The associations suggest that Europe develops a legal classification of the currency, as well as a uniform supervisory and regulatory framework in which innovators will conform.
“Only if programmable digital money is subject to appropriate regulatory standards will there be legal certainty about handling digital money and only then will the general public trust digital money.” continues the Association’s position paper.
Finally, the banks require that Europe set competition standards in which banks will facilitate European Payment solutions. The competition laws should support a uniform, European approach and take into account changes in the international competitive environment.
