The Association of German Private Banks expresses its views on the digital Euro, stating that the currency must comply with the national system.

With the advocacy of blockchain technology, discussions on the digitization of national currencies have been increasing among governments around the world. For instance, China, which has been very active recently, especially under the leadership of President Xi Jinping, has made significant progress in a short period of time. Recently, the German Banking Association presented a position paper outlining their arguments regarding the digital Euro.

On October 30, the German Banking Association Bankenverband, representing over 200 private commercial banks and 11 member associations, released a paper focusing on a key proposition: the current economy needs a programmable digital euro.

Starting with a reference to Facebook's Libra project, the article delves into what the global currency and monetary system of the digital age will look like and who will shape it. The association provided an answer:

Without a doubt, the responsibility for the monetary system lies with sovereign nation-states, and any currency provided by banks or private companies must conform to the system determined by the country and will continue to do so.

The association argues that any action contrary to this principle would ultimately lead to chaos and instability. The content continues by stating that a digital euro based on encryption technology is necessary and justified. The technological innovation of the "Fourth Industrial Revolution" will be the engine of change in the world's economic structure, significantly altering our payment methods and the maintenance of tangible value. Therefore, achieving social consensus on how to integrate programmable digital currency into the existing financial system becomes even more important. The association states:

Users of the digital euro must have a European or even global identity standard. Strict standards should be used to identify customers for every form of digital currency.

In simpler terms:

In fact, we deal with digital currency every day. For a long time, people have referred to digital currency as bank money when transferring money via banks, direct debits, checks, or card payments. Note that the structure behind digital currency here is "bank money"; the newly discussed types of digital currency are related to significant technological innovations, as they can be linked to smart contracts, and the underlying structure is no longer traditional bank money.

The report also suggests that to maintain Europe's competitiveness, meet customer needs, and reduce transaction costs, consideration should be given to introducing a euro-based programmable digital currency. This is the second important reason, as they believe this form of digital currency will rapidly become more significant.

However, the article emphasizes that the existing monetary system must not be threatened by encryption-based digital currencies, as stable currency is the foundation of any economic system, and the association must ensure that traditional stable currency remains the core element of national sovereignty.

Based on these two main reasons, the association further calls on national and international policymakers to take responsible action. German Finance Minister Olaf Scholz has recently advocated for the issuance of a digital euro coin, stating that this would be beneficial for Europe and should not be left to China, Russia, the United States, or any private providers.

Yet, there is also opposition. European Central Bank President Mario Draghi recently stated that private stablecoins and cryptocurrencies, in general, have limited value and added:

So far, stablecoins and crypto-assets have had limited implications in these areas, and their design does not make them suitable substitutes for money.

In addition, the German Federal Parliament recently issued a statement, saying that cryptocurrencies like Bitcoin are not real money in the true sense. They explained that the government intends to restrict the adoption of stablecoins:

Ensuring that stablecoins do not assume the status of a substitute for national currencies, giving them the opportunity to question the existing monetary system.

Further Reading

• US lawmakers consider introducing a bill to protect cryptocurrencies from SEC regulations
• Swiss multinational bank claims that cryptocurrencies are still in an "evolutionary" process akin to Darwinism

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