Sounds like it. But banks are my least concern. It needs a lot of technology (internet, smartphone). And most of all: it’s traceable by nature!
I still prefer cash. Simple pieces of paper or metal which simply are. I can keep them in a drawer or my pocket, and I can simply hand them to somebody else without any additional high tech, or 3rd party snooping. Life can be so easy!
Imo, due to them completely ignoring the first and biggest feature request of the public: privacy, it makes it almost completely useless to me. I prefer cash as well, but we also need a digital cash alternative, and that’s where privacy focused crypto is a better alternative for me
Hopefully won’t happen. With a digital Euro there would be no privacy. Imagine wanting to spend your money on illegal things and the responsible authorities would be automatically notified of that.
not if they implement it similar to GNU Taler. This makes paying with privacy possible, but you still wont be likely to sell your "illegal things" anonymously
When you use privacy as an example, it may not be suitable to continue that with illegal things, but yeah.
For anyone else: the point is on legal things becoming illegal from one day to the other (and not because they would be dangerous, even if they try to paint that picture), and also on total monitoring of what you buy, how you spend, and what could these mean in your life (how often you do things)
I mean there already are illegal things that are completely valid like buying drugs. Or possibly donating to causes and organisation which might be deemed criminal overnight, take for example the last generation.
That’s an interesting quote, on one hand because I don’t believe their beliefe to be true, on the other hand fuck them! This basically proves they are filthy thieves.
If too successful, the digital euro project could give people a risk-free place to hold their money, policymakers worry— undermining the commercial deposits that enable banks to lend to the economy.
Makes a little more sense when the rest of the thing is included
Does it, though? Ok, they want to protect banks (their business?) at all cost, but I can lend money to others without them as middlemen, and at the same time they seem to suggest that having money in banks is not risk-free. Not the greatest advertising strategy: my business is (inherently?) risky for my customers, and I oppose all risk-free alternatives. Because of reasons.
It does make sense. They see it as disruptive for the current model (which is always worrying when you don’t know exactly what will happen) and the risk-free would bring in worries about deflation.
I can lend money to others without them as middlemen
Private banks are highly regulated businesses to avoid fraud and maintain the trust and stability of the financial system. They also play a key role in the creation of money supply. Banks literally create money when they issue a loan, something no other business can do.
and at the same time they seem to suggest that having money in banks is not risk-free
Because it isn’t 100% risk free: your bank can default and if your cash balance exceeds the amount that is insured by the government you can lose that excess.
The central bank cannot go bankrupt because it issues its own currency. You could experience the effects of inflation, but you would be protected from bankruptcy.
That’s why authorities are concerned about allowing citizens to hold their savings in central bank accounts.
Can somebody ELI5 how the digital euro is different to the money I have on my accout right now and with which I pay digitally most of the time? The article didn’t really explain it for me…
I took a very long time to get it as well, I think governments are doing an awful job explaining it.
So cash is physical paper which signifies debt to you backed by the government. Your money on your bank account is backed by your bank. A CBDC would be like a bank account, but directly backed by the govt, so I imagine all fees are paid from your taxes, and I imagine you can pay in a shop with your ID card. The point is that then all cash can go away, the government does not print money by printing it, it does it by increasing a number in a database table, and pays its obligation digitally.
Proponents of it talk of cutting the costs of actually printing money and decreased crime since you can no longer pay people “under the table”.
Opponents of it talk of governments getting complete control over your finances.
Thanks, this helps a bit. But I hve a follow up question if you don’t mind: how is it backed exactly? I understand the gold standard (money being backed by gold) is not really applied anymore? Or is it just to a point?
It’s all just debt. So when they got rid of the gold standard, we went from “this debt we have to you is secured by our stockpiles of gold” to “trust me bro, we won’t go bankrupt”. It would be the same with a CBDC.
Basically the digital Euro would be secured by the fact is if it wasn’t secured, the Eurozone would collapse, so states and the EU at large is interested in staying solvent.
They fear that govs could get control over your finances opposed to a handful of illegal people who pay each other under the table. Is that really the problem? A handful of people who don’t deny getting money from the gov because of bad weather that ruined their warehouse, because a bad finance year because of lockdown, because of they are unemployed, almost free education and health system, etccc
Don’t think the previous explanation is quite right.
Yes, the money in your account (aka commercial bank money) is a debt that the bank owes you, payable in cash (central bank money). The banks need to borrow cash from the ECB to make good on their debts. Only the ECB is allowed to literally print cash.
Central bank money is, by law, what you can pay debts with. It’s not backed by anything. It’s what backs other things.
The banks create the commercial bank money simply by going into debt, but they are limited by the fact that they have to borrow cash to make good on that debt. The ECB raises the interest rates at which they lend out cash, if the banks create too much money and create inflation. It lowers the interest rates to encourage the banks to create more money for investments or consumer spending.
1 Problem: People use less and less cash. If people don’t want cash anymore -> infinite money glitch. This is easily fixed without a central bank digital currency (CBDC).
2 Problem: Banking crises. What happens when a bank can’t pay its debt? Until the early 20th century, that meant that your money was gone. In the wake of the crisis that triggered The Great Depression, this was fixed with mandatory deposit insurance and other legislation.
You still have the problem that our payment infrastructure - vital for the day-to-day economy - relies on banks being able to make good on their debts. In the US, retail and investment banks had to be separated by law (Glass–Steagall Act). This provision was repealed in 1999. This is often argued to have contributed to the problems around the 2007-2008 banking crisis.
If the ECB were to take over the payment infrastructure, it would be safe, no matter what happens to the banks. This may be not nearly enough to actually deal with banking screw-ups, though.
The digital euro “would end the problem of banking crises,” which “wouldn’t happen with a safe asset, the digital euro,” Fernández Ordóñez added — meaning the bulk of banking regulations, and the risk of taxpayer bailouts, could be removed too.
It is incredibly naive to think that people who came up with hundreds of way to exploit a physical currency couldn’t come up with variations of the same or entirely new ways to exploit a digital one…or just an opportunity to push their anti-regulation stance because they want to be among those people.
Won’t you think of the bankers? Do you want them to not only lose access to interest rate free loans from everyone but also to reduce the probability of a bailout when their gambling addiction catches up with them? /S
As a very very broad simplification, the value of a currency is dependent on the economic output in the area the currency is used. If the output increases, but the available currency remains the same, there is a deflation and if the output stagnates or lowers, while the currency amount increases, there is an inflation. Both are very bad for the economy at high rates and the go-to-solution is to have a stable small inflation.
The current concept is that the banks create (book) money by giving out loans and covering those loans at the central bank, which in turn increases or decreases the amount of currency in rotation, by setting an interest rate for that. That system would need to be remodelled entirely, if there is a digital currency, that replaces the book money of the banks and would be similiar to cash in terms of simply existing without interest rates in either direction. Now introducing a digital currency with default and unnegotiable interest rates for currency control, will not be very favorable with customers. In the end the banks do the same, but the customers still have the feeling that they could just cash it all out, or go to a different bank with different conditions. With the design of the digital currency that could no longer be viable.
The issue isn’t banks fundamentally. It is the way that banks are deregulated, privatized and run by greedy fucks, who know that there bank is “too big to fail”, so they can get away with holding the real economy hostage.
The banks would never allow it because it would put them out of business. The real question is whether that’s a good thing, and my gut feeling is that it probably is. They are just rent seeking and it likely provides negative value to the economy in real terms.
But I think even with the limits being proposed, it could at least be a good thing for people without a lot of money who tend to get bent over hard by the banks.
A regulator-supervisor should not be a market participant,” said Ignazio Angeloni, a professor at the European University Institute in Florence. “It would be like if a referee was also a player … the digital euro would break this rule.”
If too successful, the digital euro project could give people a risk-free place to hold their money, policymakers worry— undermining the commercial deposits that enable banks to lend to the economy.
Makes sense to me as a worry. It would be disruptive, though I’d hope it would be disruptive in a good way.
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