ECB plans for a digital euro

[Duke of Marmalade]

In other words, complete privacy unless there is a suspicion

Exactly! Did Dev build something into Bunrat that insists on privacy of the State currency even for criminal activity?

 

[arbitron]

China has been trialling something like this for some time: "digital yuan" or e-CNY

 

[Dominic Ó Galla]

One of the disappointments as far as I am concerned is this commitment to privacy

My reading of this thread + some googling is that there's no firm/precise committment to privacy (not counting vague statements).

@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.

Bitcoin gains its privacy from the fact that you don't have to show any documents in order to get an account. There's no sign that the situation will be similar for a digtial euro.

If you have evidence to the contrary then please do let me know. Otherwise I don't believe there's any need for you to be disappointed.

 

[TomEdison]

Even physical cash is not completely private; banknotes have unique serial numbers and in the context of particular operations the authorities do sometimes record the serial numbers of particular notes and use possession/handing of those notes to prove complicity in crime.

I agree that digital euros will be much less private than physical euros. Even if the authorities do give a robust assurance of privacy there will always remain some degree of doubt or scepticism as to how much reliance you can really place on that assurance — i.e. people may perceive digital euros to be less private than they actually are. And it's the perception of privacy that will influence people's attitude to/takeup of digital euros, rather than the actuality.

Having said that, concerns about privacy may not be that big a factor in the takeup of digital euros. It's already the case that, 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.

Clearly, most people aren't overly concerned with the privacy of their spending. Even people who are will tend to reserve that concern for particular transactions, for which physical cash will still be available. They won't necessarily refuse to use digital euros for the rest of their spending.

 

[Brendan Burgess]

One of the points stressed at the meeting was that it would be optional - no one will be forced to use a Digital Euro.

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. My larger expenditures are all documented on my AIB bank statement anyway.

But if I do make a career change into crime, I will probably be more interested in dealing in cash.

 

[Fortune]

My larger expenditures are all documented on my AIB bank statement anyway

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.

 

[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.)

 

[Nermal]

One of the disappointments as far as I am concerned is this commitment to privacy. I saw it as a perfect way to reduce or at least detect crime.

To give up your privacy to prevent crime is to accept totalitarianism.

 

[Duke of Marmalade]

To give up your privacy to prevent crime is to accept totalitarianism.

And I was brought up to believe that totalitarianism was all bad

 

[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.