The Association of German Banks, a lobby group comprised of more than 200 of the country's private banks, has called for a digital euro.
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The Association of German Banks, a lobby group comprised of more than 200 of the country's private banks, including Deutsche Bank, Credit Suisse, and Commerzbank, has called for a digital euro, reports The Block. The group published a position paper last week outlining the need to create a crypto-based euro operating across a common pan-European payments platform. This latest call for a digital euro comes as China closes in on launching a digital version of the renminbi.
The association's position paper highlights the benefits of a digital euro and outlines how banks and regulators can work to deliver on it:
- In its position paper, the association argues that a digital euro has advantages over existing payments systems. Digital currencies, the association argues, citing a G7 report on stablecoins, can improve customer convenience, costs and, transaction speed. Moreover, these innovations can unlock new economic opportunities: For instance, smart contracts tied to digital currencies can enable automatic exchange of contractual obligations. All told, the association argues digital currencies, whether they're account-based or distributed ledger technology (DLT)-based, will be crucial components of the drive for digital transformation.
- It suggests the best route to making a digital euro a reality is a collaborative effort between banks and governments. Pushing back against Facebook's plans to launch its own private crypto, the paper argues that it's vital for the banking industry to work with central banks to create this crypto-based payments system. Such an approach can help address existing issues while retaining the benefits of established payments infrastructures, and crucially ensures monetary authority continues to lie with sovereign nations.
The association's desire for a digital euro adds to the growing call for state-backed cryptos — and we anticipate we'll see this intensify in 2020. Facebook's plans to launch Libra were key in catalyzing Chinese authorities' efforts to roll out their own domestic crypto alternative. And in the same vein, as the position paper from the Association of German Banks highlights, Libra is spurring debate in other jurisdictions about the need to develop government-backed crypto alternatives to existing currencies.
As we look forward to the next year, I think we'll see the clamor for these state-backed digital coins intensify — not least as governments in the US and Europe look to ensure they don't fall behind China on financial innovation. Given this growing push, I suspect that state-backed cryptos, especially the Chinese variant, will launch before Libra, especially as Zuckerberg himself has accepted that Facebook isn't the ideal messenger to bring about a global crypto.
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