The Digital Euro Could be Controlled by Private Banks
The European Central Bank (ECB) wants intermediaries, such as payment service providers and credit institutions, to be responsible for digital euro transactions.
The European Union has joined the extensive list of countries willing to launch their own central bank digital currencies (CBDCs). The latest ECB report revealed that EU leaders will decide the final fate of the digital euro after October 2023.
What did the report comment?
The latest report outlines the roles of intermediaries when launching a CBDC. Under ECB supervision, they will act as direct counterparties to individuals, businesses and traders.
The paper specifies that intermediaries will offer consumer-oriented services such as opening wallets or accounts, payment instruments among others. They will also be required to carry out Know Your Customer (KYC) and Anti-Money Laundering (AML) checks. In addition, their obligations will include offering tools or interfaces that allow consumers to pay with digital euros online, in shops or in person.
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The ECB also said it would simultaneously perform supervisory functions and facilitate the issuance of digital euros.
As part of an effort to update the CBDC’s biennial study, the ECB selected five businesses from a list of 54 potential innovators to participate in its “prototyping exercise” for the digital euro. The test is expected to be completed in the first quarter of 2023.
The exercise aims to assess all points of compatibility of the digital currency as well as the effectiveness of its partnership with Amazon and others.
What exactly is a central bank digital currency (CBDC)?
A central bank digital currency (CBDC) is a digital form of a country’s national currency that is issued and backed by its central bank.
It is designed to be used as a means of payment and store of value, similar to traditional physical currency, but is digital and can be accessed and transferred using electronic devices such as smartphones and computers.
CBDCs are a relatively new concept and are still being explored by many central banks around the world. Some of them, such as the People’s Bank of China and the Bank of Canada, were among the first with pilot programs aimed at testing the feasibility and potential benefits of issuing this type of token.
Central banks’ digital currencies have the potential to deliver a range of benefits, such as greater financial inclusion, faster and cheaper payments and improved financial stability. However, they also raise a number of political and technical challenges that need to be carefully considered, such as privacy and security concerns, potential impacts on financial intermediaries and potential effects on monetary policy.
Alexander Stefanov
Reporter at CoinsPress
Alex is an experienced finance journalist and a cryptocurrency and blockchain enthusiast. With over five years of experience covering the industry, he deeply understands the complex and constantly evolving world of digital assets. His insightful and thought-provoking articles provide readers with a clear picture of the latest developments and trends in the market. His passionate approach allows him to break down complex ideas into accessible and insightful content. Follow up on his content to be up to date with the most important trends and topics - stay ahead of the curve with CoinsPress.
