The European Union closes its public comment period on Tuesday (June 14) regarding its plans to launch a digital euro, with the Central Bank Digital Currency (CBDC) project receiving overwhelmingly negative feedback on the idea.
The more than 16,000 comments overwhelmingly argued that a CBDC would infringe on consumer privacy and give EU governments more control over citizens’ finances – and eventually their lives.
However, consultation is just that – a legal (and marketing) requirement on the way to launching a digital euro which has strong support from the European Commission and European Central Bank, as well as the European Parliament. .
In February, the financial director of the European Commission Mairead McGuinness said a digital euro will be proposed next year, so it seems likely that the consultation will largely be a roadmap to convince the public that their concerns are unfounded.
Read more: The EU faces opposition from citizens in the race for the digital euro
There are now about 100 countries working on or studying a CBDC, according to the Atlantic Council. A new sound update Central Bank Digital Currency Tracker shows that 50 countries are in the development, pilot or launch phase.
This includes 10 that have been launched – the Bahamas, Jamaica, Nigeria and all seven members of the Eastern Caribbean Currency Union, as well as 15 in the pilot phase. Although the Chinese digital yuan has not yet been technically launched, it is practically ready to be launched, at least from a technical point of view, although there are concerns about sufficient adoption by citizens.
This includes all G-7 members – the US and UK are the furthest behind – and 19 of the G-20 members.
Among the issues the Atlantic Council said it foresees is “a significant interoperability issue” that will occur soon and will likely start to become an increasingly significant issue.
The clearing house objected
The real-time payment company The Clearing House is strongly opposed to a CBDC, Rob Hunterdirector of regulatory and legislative affairs and deputy general counsel at The Clearing House (TCH), Karen Webster of PYMNTS told PYMNTS last week.
See more : Clearinghouse Says Digital Dollar Is A Solution Looking For A Problem
Depositors choose to hold their funds in digital dollars, which unlike banks cannot collapse, so the banking industry fears losing access to these funds. Even if the deposits are held in banks, they would not have access to them to lend them.
“Basically it has to be a central bank liability, and unlike deposits, it can’t be used for lending,” Hunter said.
In addition to seriously harming the banking sector, it would leave far less money available to lend, which would worsen economic downturns just when more people would be most inclined to abandon private financial institutions (FIs).
It’s “the worst of both worlds,” Hunter said. The banks “find themselves with all the [know your customer (KYC), Office of Foreign Assets Control (OFAC) sanctions list] screening, customer due diligence and anti-money laundering screening obligations without a viable source of revenue. And it’s a clean drain on their deposits.
This opinion is not surprising, as the company is owned by a group of big banks – which have made their views clear recently, with two industry associations presenting a very strong “no” vote to the Federal Reserve via its public comment website.
The International Monetary Fund (IMF) has released a study this, unsurprisingly, requires that all parts of the crypto ecosystem, including CBDCs, be built on environmentally friendly technology – unlike the power-hungry system that underpins bitcoin.
“While crypto assets like bitcoin are a waste of resources, other designs could be more energy efficient than existing payment systems,” he said.