German banks have presented a position paper in which they make several arguments for the digital euro.
On Oct. 30, in a paper released by the Association of German Banks (Bankenverband), which represents more than 200 private commercial banks and eleven member associations, banks stated that the “economy needs a programmable digital euro.”
Monetary policy is the state’s responsibility, says Bankenverband
The paper states that the responsibility for the monetary system lies with sovereign nation-states and that any currency provided by banks or private companies must fit into a state-determined system. “Anything else would ultimately lead to chaos and instability,” the paper reads.
The banks make the case for a cryptography-based digital euro which, they state, should be created on the condition that a concurrent, common, pan-European payments platform is also established, further adding:
“The user of a digital euro – whether man or machine – must be clearly identifiable. This requires a European or, better still, a global identity standard. With every form of digital money, customers should be identified using a standard that is just as strict as that which banks and other obligated entities are required to apply under current legal framework pursuing the combat against money laundering and terrorist financing.”
However, according to Bankenverband, a competitive payment system can only be based on a common standard and a common currency. It stated, “In order to maintain Europe’s competitiveness, satisfy customers’ needs and reduce transaction costs, the introduction of euro-based, programmable digital money should be considered.”
Although the private German banks are convinced that, in a digitized economy, this form of digital money will rapidly gain in importance, they state that the existing monetary system must not “be endangered by the provision of crypto-based digital money.”
A private global digital currency, such as Facebook’s Libra, competing with the official key currencies in the world economy would most likely be a source of considerable economic and political conflict, the paper adds.
The banks further call on national and international policymakers to act responsibly and assure that competition with private currencies should not be allowed.
While a digital euro seems appealing, German officials criticize crypto
The German finance minister Olaf Scholz echoed similar sentiments when he recently advocated for the idea of launching a digital euro coin, stating that such a digital payment system would be beneficial for Europe and that they “should not leave the field to China, Russia, the U.S. or any private providers.
Mario Draghi, president of the European Central Bank, recently said that private stablecoins and cryptocurrency in general are of little value, adding:
“Thus far, stablecoins and crypto-assets have had limited implications in these areas and are not designed in ways that make them suitable substitutes for money.”
The president of the European Central Bank is joined in his sentiments by the German federal parliament, which recently released a statement in which they said that cryptocurrencies such as Bitcoin (BTC) are not real money.
Moreover, the statement points out that stablecoins are no alternative to fiat money and explains that the government intends to limit their adoption:
“It will be ensured that stablecoins do not establish themselves as an alternative to state currencies and thus call into question the existing monetary system.”