The European Union (EU) will propose to the European Central Bank (ECB) the issuance of a public digital currency.
This was reported by Reuters, which was able to view a draft of an EU document, prepared by the current Finnish presidency and still open to changes, as a response to Facebook’s plan to issue the Libra stablecoin.
The document reads:
“The ECB and other EU central banks could usefully explore the opportunities as well as challenges of issuing central bank digital currencies including by considering concrete steps to this effect”.
In particular, France and Germany expressed negative views on Libra as a potential risk for the financial sector and decided to promote the development of a public alternative.
The draft viewed by Reuters invites the ECB to create such an alternative, probably along the lines of the similar Chinese initiative, and urges all EU countries to work towards a common approach to cryptocurrencies, including the possibility of imposing some bans on projects deemed too risky.
According to reports, the proposal could be discussed by EU finance ministers as early as Friday, and could theoretically be approved at the next meeting on December 5th.
The so-called stablecoins are causing concern among states, which are probably worried about losing monetary sovereignty, although it is curious that central banks do not share this attitude.
It may be the case that Central Bank engineers have better understood than politicians that fiat-based stablecoins are nothing more than derivatives that represent them in digital form, and that if they remain 100% covered by fiat currency reserves, they have no power to affect monetary policies.
Obviously, if they were not 100% covered, the impact might be significant, but it should be remembered that not only did the promoters of Libra declare that it would always be 100% covered, but they also asked that the public regulators themselves take responsibility for checking and certifying that this is true.
Another interpretation of this possible race to issue public digital currencies is that such currencies would make all transactions fully traceable, which is probably considered very attractive by politicians, but not particularly interesting for central banks.
The objective of such a prospect could be to increase the capacity of states to unearth the black economy and to reliably compare the real spending power of citizens with their tax returns.
In fact, existing stablecoins, such as Tether (USDT), are based on anonymous tokens and wallets, so while they are fully traceable, it is very difficult to trace the identities of their users.
On the other hand, centralised digital currencies, such as those issued by central banks, are not anonymous, making all transactions, including user identities, perfectly traceable.