Europe is at the cusp of becoming the world’s frontier digital asset, blockchain, and central bank digital currency (CBDC) hub. In a new report, European regulators shared their thoughts on the continued progress and the possible pitfalls, including how MiCA will impact Bitcoin, the benefits and risks of the digital euro, and the instability of stablecoins.
A digital euro could boost financial inclusion and give Europeans a non-commercial alternative to digital payment platforms, says Monique Goyens, the Director General of the European Consumers’ Organisation. However, its benefits can only be realized if it has all the properties of cash. The European Central Bank (ECB) must also ensure privacy “by design and by default.”
Evelien Witlox, the Digital Euro Programme Manager at ECB, concurs. “In essence, a digital euro would bring the most appreciated features of cash to the digital era. Hence, it could be used for all daily transactions in several payment segments, including e-commerce,” she stated in the report that was prepared by European financial think tank Eurofi.
The digital euro is Europe’s opportunity to increase its strategic autonomy and monetary sovereignty, she added.
One of the most contentious issues for the digital euro remains its privacy aspect. Some proposals include selective confidentiality for low-value online payments and an offline functionality that keeps users’ data private.
This isn’t enough, according to Tim Hermans, the executive director of the National Bank of Belgium. Further work is still needed on both options, he believes.
Digital euro users should not be concerned about their data privacy, ECB’s Witlox says.
“As a central bank, the ECB has no interest in users’ personal data. This is why…we are considering solutions that would preserve privacy by default and by design, giving people control of their payment data,” she commented.
Away from the digital euro, regulators and banking executives delved into stablecoins and MiCA, the region’s new Bitcoin regulatory framework.
Benoît de Juvigny, the Secretary General of the French financial watchdog, the Autorité des Marchés Financiers, says MiCA will “provide legal certainty to [digital asset] players seeking to develop their activities in the EU.”
On stablecoins, Japan’s Financial Services Agency’s Tomoko Amaya called for vigilance against common risks such as “liquidity and maturity mismatches, excessive leverage, misuse of client assets, and conflicts of interest.”