Digital euros, yuan and dollars? Faced with increased popularity for cryptocurrency bitcoin, as well as for online payments during the pandemic, central banks are exploring new units of their own.
Outlined below is an examination of how central bank digital currencies could resemble and differ from cryptocurrencies and “stablecoin” projects like Facebook-backed Diem.
With the backing of Europe’s biggest economy Germany, the European Central Bank is mulling a digital euro that could be guaranteed by the central bank, in turn potentially offering greater security than by commercial banks.
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The ECB has spoken also about the possibility one day of central bank personal payment cards and accounts being linked to a digital euro.
A formal decision on how to proceed is expected this year following consultations amid European concerns around privacy protection.
Issuing and transferring digital euros could be done using technology similar to the blockchain ledger on which cryptocurrencies such as bitcoin rely.
But the ECB has stressed that a digital euro would not replace cash and should not be seen as a cryptocurrency.
Indeed, 13 years after the creation of bitcoin, while the wider cryptocurrency market has swelled to a value above $2.0 trillion, its use as a means of payments has yet to take off.
And while one bitcoin is today worth around $60,000, the ECB has noted that one euro must remain one euro.
China’s central bank has been working on a digital currency since 2014 and is testing the use of