Germany Is Looking into the Opportunity of Releasing a Digital Euro

So far, over 15 countries have announced plans of developing state-issued digital currencies, including China and Russia, two of the world’s largest economic giants.  This has led to a worldwide governmental trend, where decision-makers analyse the opportunities associated with creating central bank-backed digital currencies.

Recent reports indicate that Germany, and perhaps the entire European Union, might join this trend within the next couple of years. With this in mind, in a recent interview with WirtschaftsWoche, a local business magazine, Olaf Scholz, the German finance minister and vice-chancellor, expressed his interest in CBDCs.

According to him, a digital version of the Euro would serve as a great opportunity, and therefore help further develop the financial centre of Europe alongside its integration within the worldwide financial system. Similarly, Scholz believes that the CBDC field shouldn’t be exclusive to other actors such as the US, Russia, China or private entities like Facebook.

This statement comes at an interesting time, granted that one month ago, Germany updated its legislative framework to prevent the release and use of parallel currencies. As a response to this law, Scholz stated that: “A core element of state sovereignty is the issuing of a currency. We will not leave this task to private companies.”

At this point in time, several CBDCs exist, yet their difficult design and lack of popularity fail to showcase whether CBDCs are bound to change the current financial market. There’s also the problem of cryptocurrencies, since they are bound to offer numerous advantages over state-issued digital currencies. Some of these benefits include decentralization, transparency, fund security, and increased privacy for coin users. On the other hand, a CBDC lacks these advantages, and is simply a fiat currency that’s easier to use.

Regardless, many members of the cryptocurrency community believe that CBDCs are simply an experiment, meant to determine whether state-owned currencies are sustainable in the long-term if transformed into digital coins. So far, China seems to be the closest international actor to releasing a CBDC, granted that reports indicate that a digital version of the Yuan might be finalized and released in 2020.