Digital currency ambitions unveiled in Europe: seize opportunities and guard against opponents

Reporter: Tian Yuan

Source: Economic Daily

In 2019, the global central banks have started to deploy digital currencies, hoping to occupy a leading position in this important fintech track. According to the latest report, the European Central Bank, the Bank of England, the Bank of Japan, the Swiss National Bank, the Bank of Canada and the Bank of Sweden will jointly form a central bank digital currency group, led by the European Central Bank, showing Europe's ambitions in the digital currency field.

Breaking through the US monopoly and launching "European version" of research and development

Previously, the payment of online transactions in the European Union was monopolized by US credit card companies, and the cost of cross-border transactions remained high due to the lack of a unified payment system. To this end, Estonia proposed the creation of a "European version" of digital currency in 2017. The European Central Bank started the development of digital currency in 2018, but at that time only set the goal to "create a EU-wide real-time payment system" and did not involve banks Interim clearing and settlement. Senior ECB officials admitted that when Bitcoin first appeared, the bank did not realize that such cryptocurrencies would have such a significant impact on existing cross-border payment systems and global financial stability.

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EU financial policymakers now have a sense of crisis. Due to the continuous decline in demand for cash from European economies, and the US Facebook company's announcement that it will still launch "Libra Coin" as scheduled in June 2020, the European Central Bank has accelerated its launch of its own digital currency. The European Central Bank proposes to review the costs and benefits of digital currencies with the central banks of member states on the basis of the existing financial system, and in particular to assess the chain reaction of its role as a financial intermediary. The European Central Bank said that in the future, EU residents can open accounts directly with the bank to significantly reduce the cost of cross-border payment transactions.

The European Central Bank has stepped up its launch of digital currency and has also been strongly supported by the rapid development of the European crypto asset industry. According to PwC data, Europe accounts for 41% of the global crypto asset financing scale, which is much higher than the 28% in the Americas. This shows that in the field of crypto assets based on the rapid development of financial technology such as blockchain, the European status of "curvy overtaking" has become increasingly important. Dongbrovskys, the European Commission's deputy chairman responsible for financial affairs, recently pointed out that the European Commission will continue to track the progress of Libra and will work with global partners to dynamically assess its impact on financial stability, monetary policy, market competition, data privacy, and the Internet. Potential risks in many areas including safety and consumer protection. The intention of this move to prevent the United States from using the "Libra Coin" to overtake is obvious.

European Central Bank leads the way

It is not only the European Central Bank that has a sense of urgency, but also the European Central Banks. The first deputy governor of the French central bank, Boueu, suggested that blockchain technology could be used to reshape the core functions and basic business of the banking industry, and establish a digital settlement system based on the euro, and then extend it to other attributes and functions of the euro. Finally, a new monetary policy system based on this was established. To this end, the Bank of France is recruiting blockchain talents globally to enter its financial stability and operations office. The requirements are quite novel and interesting: "You are not only a blockchain expert, you also need to understand the economics of cryptocurrencies. Good online gamer. "

The Swedish central bank and Accenture have jointly launched the E-KRONA digital currency pilot project. The Swedish central bank started research and development of Euro-based E-KRONA as early as 2016, and released the world's first digital currency legal research report in September 2017. Accenture is responsible for building E-KRONA's various consumer-oriented mobile application scenarios within one year, and precision testing its application process and environment for 7 years.

It is worth mentioning that unlike the French central bank's blockchain-based digital currency research and development, the Swedish central bank considers blockchain and distributed bookkeeping to be "inefficient technologies", and E-KRONA will "not take an unusual path", but The ability to “interact” with digital currencies based on the aforementioned technologies is still retained. At present, Sweden has listed what technology E-KRONA uses as "a major issue involving national security."

Directions remain divided and prudence must be maintained

However, there are different voices on the issue of central bank digital currency. Switzerland, which is not a member of the European Union, has always been open to the development of cryptocurrencies. In recent years, it has been more committed to building a global crypto asset enterprise base known as the “crypto valley”. However, after the latest assessment by the Swiss government, it has been quite cautious about launching digital currencies. It believes that although the central bank's digital currency may help reduce financial transaction costs, strengthen monetary policy enforcement, and reduce transnational financial crimes, it has launched a single global The central bank's digital currency "risks will outweigh the benefits" will also pose a major threat to global financial stability.

At present, there are differences of opinion on the role of digital currency issuance, especially the role of private capital. The French central bank has stated that it will continue to strictly prohibit insurance companies and trust funds from operating crypto assets, and also called for accelerating the improvement of the global regulatory framework in order to firmly control the right to issue digital currencies in the hands of the government. Former ECB board member Cory believes that the ECB and its member states ’central banks’ accelerated measures to launch their own digital currencies should not prevent or even crowd out private capital to continue to play a role in this field, and insist that private capital be in a more efficient payment system. It has the dominant market position in financial innovation such as upgrading.

Regardless of whether the European Central Bank plans to launch a "European version" of digital currencies, or EU member states launch their own central bank digital currencies based on the euro, Europe is seizing the lead in this field, preventing US and other competitors from overtaking, occupying a favorable position in the international financial market, A grand strategy leading the development of global financial governance rules has been established. "Europe should be 'top-notch' in the development of digital currencies." European Central Bank President Lagarde made no secret of this European ambition.

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