The European Central Bank has kicked off the exploration project for its CBDC. On the sidelines of this project there is the creation of an European credit card that could make its entry into a market worth trillions, dominated by the large American companies Visa and Mastercard, two giants with revenues swollen by commissions billionaires of European citizens. A market that, before the pandemic, was worth almost 4 trillion dollars and was increasing at a rate of growth of 10% per year. The process of creating a European CBD could take two years and Frankfurt looks very determined, unlike the more cautious Fed in America.
Ecb president Christine Lagarde said there were encouraging results after nine months of consultations, which “prompted us to start the project”. Fabio Panetta, member of the executive committee of the Ecb and head of the Task Force on the digital euro, added “we will confront the European Parliament”, implying that it is not possible to risk that currencies of other jurisdictions affirm themselves in Europe.
Governance aspects:
The process of creating this digital currency will be very important. A reason for debate will be the greater guarantees that the European institutions can provide with respect to private operators. The digital euro will open a sort of citizens’ bank account with the ECB, and this mechanism must be prevented from ‘stealing’ customers from banks: among the hypotheses, a 3,000 euro limit on the availability of digital euro. The digital euro project could have a possible implication with the project for the creation of a European credit card, in which 33 large European banks work, opening up an immense market to competition from a European operator.
The main technological doubts remain open: whether the euro will be a centralized system or a ledger distributed on blockchain.
Monetary policy:
The main implication of monetary policy is that the ECB could implement the current negative interest rate policy towards households to boost consumption, disintermediating the banks. But the game is bigger: from the Ecb it would aim at strategic autonomy, at responding to the challenge of crypto-assets and stablecoins, or the defense of the European ecosystem from projects such as Facebook’s cryptocurrency. China in the background is ahead on creating its own digital currency, and both European and US institutions will not stand by without proposing their solutions.
