In Sweden, the concrete development of an e-krona as a digital central bank currency has already started in a pilot project, and it should now also move forward in the euro zone. As the ECB announced at the beginning of October, it is “intensifying” work on a digital euro and wanted to start consultations and an unspecified test phase in the middle of the month.

At the same time, the ECB published a detailed study on the subject. In it, the central bank explains both the need for state digital currencies and possible forms of them – and shows that the e-euro could even become almost as decentralized as Bitcoin and as programmable as Ethereum.

“We should be prepared to introduce a digital euro if necessary, “said ECB President Christine Lagarde when presenting the latest information. In general, in Europe, unlike in Sweden, pretty much everything is still open when it comes to digital state money. But that also means: While the Scandinavian country has already opted for a relatively restrictive wallet variant with banks as intermediaries, the digital euro could come much closer to a real blockchain currency.

As the authors of the ECB study emphasize, they do not want to argue in favor of a specific system and do not want to draw any final conclusions about questions of installation costs or operating costs. Every potential system must meet a number of principles and requirements that are initially formulated in general terms. In addition to points such as robustness, security and data protection (which are probably also of interest to users of private digital money such as Bitcoin), the central bank also observes laws against money laundering and terrorism financing.

Facebook’s Libra forced a reaction The early triumph of the original crypto currency Bitcoin aroused the hope or concern that the global monetary system would soon function entirely without central and commercial banks, and ultimately also without control options by states. When Facebook Mitte 2019 presented its money project Libra, politicians around the world were shocked by it and central banks felt they were forced to do more of their own in this area. In the meantime, Libra has lost much of its horror – but the work on state e-money continues, as not only the ECB shows.

According to the study, one thing is already clear for the digital euro: commercial banks will become for it continue to have a role to play, even if transactions are checked and managed decentrally with it, as with Bitcoin. “At least” regulated intermediaries (the banks that offer accounts and payment transactions today) would be needed to register and identify the authorized users of the state digital money. The central bank does not want to set up millions of accounts for private individuals itself, although this would not only be possible with an e-currency controlled by it.

Here there is a conflict of objectives: More control over one’s own financial system than with accounts directly at the central bank is not possible, but that would also mean the maximum effort for the ECB. The other extreme would be a decentralized infrastructure like Bitcoin or more generally with blockchain technology for distributed ledger technology (DLT). With this model, the ECB could limit itself to stipulating standards for the security of the blockchain used. According to the study, your “operational burden” would then be significantly lower, but the price for using unproven “frontier” techniques would be.

Not a crypto asset and not stablecoin While this point and most of the others in the study are not conclusively assessed, the central bank points out that their digital euro is definitely not a “crypto asset” should be understood and not as a mere “stablecoin”. Both are terms from the free digital money scene and stand for different forms of blockchain systems. Doc