ECB plans for a digital euro

[Duke of Marmalade]

@Brendan Burgess did mention "There will be no record of the transaction.", however, I don't see how that could possibly work, as there needs to be a record in order to prevent double-spending. Even Bitcoin has a ledger where all transactions are recorded

I don’t think double spending can arise with a central currency. When you flash your AIB debit card at the till AFAIK AIB instantly reduce your account balance and you can’t spend that money again. With a decentralised currency on an open source platform there needs time for everyone to agree that you owned the coin. An essential feature of Bitcoin is that when after say 10 minutes the miners have agreed you owned the coin your transfer to a new owner is recorded on the ledger and ithe coin remains traceable back to its creation.

 

[Fortune]

when after say 10 minutes the miners have agreed you owned the coin your transfer to a new owner is recorded

"Sorry, the value of Bitcoin declined over the 10 minutes needed to confirm the transaction. You need to pay more"

 

[TomEdison]

I've never understood the privacy argument against spending on cards. They may know how much you've spent in Dunnes, Boots and Amazon but they've no idea what you've bought.

Dunnes, Boots and Amazon know, though. (As an aside, that's the main reason that retailers run loyalty programmes — so they can harvest that information and monetize it in various ways.)

 

[Protocol]

I learned yesterday that CBDC have already been launched in other places:


Countries with Launched (Live) CBDCs

- Bahamas : Sand Dollar, launched October 2020

- Nigeria : e‑Naira, launched October 25, 2021

- Jamaica : Jam‑Dex, launched July 2022

- Eastern Caribbean Currency Union – DCash, rolled out 2021–2022 across islands like Antigua & Barbuda, Grenada, St. Kitts & Nevis, St. Lucia, Dominica, Montserrat, Anguilla, and St. Vincent & the Grenadines



That makes four launched systems, counting the ECCU as one currency union.

 

[Duke of Marmalade]

I attended an ECB webinar this morning on this topic. I knew nothing about it.

Boss I was starting to ask myself "what is the point of this CBDC?". The commercial banks have really optimised digital money transmission, I can't see how CBDC will make it more efficient. It will not compete with commercial banks in terms of the interest, if any, that is credited so no big change to the general role of our commercial banks including leveraging off the deposit base to finance industry.
Was any clear "win" from CBDC presented in the webinar?
The list of countries provided by @Protocol is interesting. First of all this is not leading edge technology - Nigeria already 4 years in place and the Bahamas 5 years. Notably absent from that list are any major economies such as US, UK, Eurozone, Japan, Canada, Australia etc. My guess is that for one reason or another the commercial banking system didn't see it worthwhile to provide digital monetary transmission to the countries on that list and the Central Bank had to step up to the plate.

 

[Brendan Burgess]

I did ask the question at the webinar why would I as a consumer want this?

The answers were a bit abstract in the sense of no immediate direct benefit to me, but they did say

1) The absence of a payments processor in the EU makes us vulnerable to sanctions.
2) I can make payments offline. So if the internet or power goes down, I can still shop.
3) Another competitor in the market would bring prices down which would eventually be passed on to consumers

I have Revolut and AIB on my phone already. Do I want to add another one? Not really.

 

[Dr Strangelove]

I@

in the US, just 5% of point-of-sale consumer transactions are settled in cash; in the Asia-Pacific region, 15%; in Europe, 22%. And that's just point-of-sale consumer transactions; I haven't found figures for cash transactions as a percentage of total household spending, but my guess is that it will be well under 1% in the US; not much higher in Europe.

In Ireland and the euro area it was 54% both in 2022 according to the ECB SPACE survey.

For sure it’s on a downward trend but cash is still generally present in retail.

 

[BIG-notorious]

I have Revolut and AIB on my phone already. Do I want to add another one? Not really.

I on the other hand have Revolut, AIB, EBS, BOI, and 2x credit union apps on my phone. All of which provide different functionality and none of which I'd willingly dispense with.

So another financial app on my phone? If it provides functionality which will benefit me then another app on my phone is no load to carry...

 

[Fortune]

the commercial banking system didn't see it worthwhile to provide digital monetary transmission to the countries on that list

I think some of those countries skipped the bank stage altogether. The citizens went from cash straight to mobile app payments, and never really had a bank account for making payments.

 

[Brendan Burgess]

I on the other hand have Revolut, AIB, EBS, BOI, and 2x credit union apps on my phone. All of which provide different functionality and none of which I'd willingly dispense with.

I prefer to keep things simple. I have three cards in my wallet, Revolut, AIB and and Ulster Bank sterling account. That is enough. I have mistakenly tapped into the Tube with my Ulster Account and tapped out with my Revolut which cost me effectively two fares.

But I see people with wallet loads of cards so adding another to their phone wouldn't make much difference.

 

[Dr Strangelove]

But I see people with wallet loads of cards so adding another to their phone wouldn't make much difference.

It is very likely that the digital euro will be provided by existing banks and fintechs.

So you will be able to tap into your app and look at a digital euro balance side-by-side with all other balances. For purchases and transfers you’ll be able to decide whether you want to use your digital euro balance or your other balance.

 

[CharlieMac]

Transaction charges or Interchange fees on consumer debit cards are capped at 0.2% of the transaction value under EU regulations yet some businesses still won't accept payment via debit card, cash only. Maybe there are other costs and hassles related to having a card machine to accept payment?

If a digital currency could make it easier/cheaper for retailers to accept digital payment then it would be a good thing. I'm thinking of scenarios like barbershops and other sole traders on razor thin margins, buying a second hand car from someone etc.

 

[Brendan Burgess]

If a digital currency could make it easier/cheaper for retailers to accept digital payment

That is the plan. That it will be cheaper for retailers.

 

[Dr Strangelove]

Maybe there are other costs and hassles related to having a card machine to accept payment?

That's just the interchange fee.

There are also additional scheme and processor fees which vary a lot. Smaller firms have less clout to negotiate lower fees.

 

[BlackandBlue]

YouTube video about the project.

 

[ClubMan]

Eurosystem moving to next phase of digital euro project

The European Central Bank (ECB) is the central bank of the European Union countries which have adopted the euro. Our main task is to maintain price stability in the euro area and so preserve the purchasing power of the single currency.

www.ecb.europa.eu

 

[Freelance]

@ClubMan Thanks for posting this. It’s a very interesting read, especially the linked research report looking at small merchants and vulnerable users

Without wanting to be political, it’s this thorough, prudent, plodding, ethical, inclusive, radical approach to change and improvement that is one of the EU’s greatest strengths. Something that we rarely appreciate.

 

[ClubMan]

Delaying digital euro harms Europe, German vice-chancellor says

Those who fail to recognise that it is now essential to move forward with the digital euro are harming Europe itself, Vice-Chancellor Lars Klingbeil told journalists, amid delays in the European Parliament over approval of the legislation. #EuropeNews

www.euronews.com

UK bank bosses plan to set up Visa and Mastercard alternative amid Trump fears

Exclusive: First meeting to be held over domestic payments system aimed at reducing reliance on US networks

www.theguardian.com

Thanks DJT...

 

[cremeegg]

Personally, I have no fears about privacy. I am not involved in crime so no one will be too interested in where I spend cash.

Seriously, this seems a bit naive in this day and age. Surely there are many things we do which we would rather that were not visible to public authorities. Certainly I always pay cash for my copy of Anti-Fascist weekly and Nice Nazi monthly. More seriously I might want to donate to Palestine Action, legal here, but illegal (last week at least) in the UK. What if I want to visit the US, do I want their immigration to be able to see my spending for the last 5 years.

 

[Brendan Burgess]

Certainly I always pay cash for my copy of Anti-Fascist weekly and Nice Nazi monthly. More seriously I might want to donate to Palestine Action, legal here, but illegal (last week at least) in the UK. What if I want to visit the US, do I want their immigration to be able to see my spending for the last 5 years.

Maybe I am naive, but none of these troubles me.

And, as I have said. You are not forced to use the digital euro. You can continue to pay for anything you want to hide in cash.