In an interview with Cointelegraph, Jonas Gross discussed the dangers to private banks of the digital euro and the ECB’s objectives. Next year is the target date for the ECB’s introduction of a working model of a digital euro. After five years, the European CBDC could be operational. Nevertheless, there are numerous unanswered uncertainties about the potential digital currency. 

In what format might it be distributed? Like the People’s Republic of China, do other central banks have a head start on the ECB regarding CBDC? According to Jonas Gross, Cointelegraph auf Deutsch talked with him about these and other concerns.

New Digital Currency

According to Gross, central bank money presents fewer dangers than digital money distributed by a commercial bank. Unlike commercial banks, a central bank is immune to bankruptcy since it can print enough money as necessary in an emergency. There could be instances when customers want to move all their digital cash from a banking institution to the central bank, which would imply that commercial banks would cease to exist.

There are two possible strategies to avoid this: Limiting the sums of cash a citizen can store in central bank cash or implementing a negative interest rate on CBDC assets over a certain limit are two options being considered. The digital euro will mostly be used as digital cash and another way to pay for things. It will be used less as a way to store valuation. The central bank doesn’t wish to compete with the banks.

Complete Privacy

According to Gross, the digital euro wouldn’t be embraced by EU citizens unless it has specific properties, including total anonymity. His team conducted research that revealed that a digital euro could be made as anonymous as currency using current technology. 

It’s technically conceivable, according to Gross, to let anonymous digital euro transfers up to a specific amount, after which verification may be required. According to Gross, this might be a huge benefit for the digital euro, given that currency will become less and less relevant.

It’s possible in some decades that cash may be completely obsolete like it is in Sweden or China now. There is no privacy in transactions without a digital euro that partly facilitates anonymous transactions. Even though it may appear contradictory, the digital euro can improve privacy if implemented in a way that prioritizes anonymity.

The ECB’s Inaction

In Gross’s view, the most pressing issue is that the European Central Bank has yet to define its goals and functions for the digital euro. The European Central Bank (ECB) evaluated four different digital currency designs last year in collaboration with the central banks of numerous member states. KSI, the main technology of Estonia’s e-government, was utilized to create the digital euro.

Another alternative is a digital euro constructed on the TIPS, an electronic banking system developed in 2018 by the European Union. The third option is a hybrid arrangement between blockchain and traditional banking. That leaves bearer instruments, cash cards, or devices that can process transactions without internet connectivity. The ECB is yet to decide on a single architecture for the digital euro. Gross added because the variety of possible applications isn’t yet fully understood.