Last week, a prank call to the European Central Bank’s Christine Lagarde revealed that the next ECB will have controls over how it spends. This differs from what the UK has said about its digital pound.
Recent words from the European Central Bank (ECB) suggest that the digital euro may not be as untethered as its digital pound counterpart.
In a recent call with a comedian posing as Volodymyr Zelensky, Christine Lagarde, President of the European Central Bank, spoke about the upcoming European Central Bank Digital Currency (CBDC). On the call, Europe’s largest banker said she was “personally convinced we have to move forward” with the digital euro.
During the interview, Lagarde admitted that there will be an element of control over how people use the digital euro. “There will be control, you’re right. You’re absolutely right… (a) limited amount of control,” she said. “We are thinking if for very small amounts, anything around 300, 400 euros, we could have a mechanism where there is no control. But that could be dangerous.”
An April 6 tweet from industry watcher Guru mentioned Lagarde’s announcement of plans to launch a digital euro and noted that Lagarde “says there will be control over payments.” It also included a brief clip of Lagarde outlining her plans in an interview.
During the interview, the senior banker indicated that we will know a lot in October.
Lagarde has been a prominent figure in the global economy for some time, having previously served as France’s Finance Minister and 11th Managing Director of the International Monetary Fund (IMF) from 2011 to 2019. She held her last position as President of the European Central Bank. Since November 2020. Her comments about control indicate that discussions about CBDCs in Europe being programmable and controllable are happening at very high levels.
But what is Lagarde talking about?
Control of CBDCs
To summarize, a central bank digital currency is a digital form of currency that is issued and backed by the central bank of a country. Central bank digital currencies are designed to function similarly to physical currency, but in digital form.
The European Union has been exploring the possibility of a “digital euro” since at least 2019. And the 27-member bloc published its first primer a report About the idea in October 2020. Latest and newest Evolution report Released in December 2022.
What Lagarde is referring to is the idea of a programmable CBDC, or a digital currency with built-in rules and restrictions. (Or the possibility that the rules will come into effect at a later date).
Programmable central bank digital currencies allow issuers to exercise greater control over how the currency is spent. For example, a programmable digital euro can only be programmed to be spent on specific goods or services. or within a specific region. This represents an opportunity for the European Union to exercise greater control over its internal economy. Supporters say that would make it harder for criminals to operate, though that is debatable.
It is understood that this increased control by issuers can lead to concerns about privacy and independence. Critics of CBDCs are already harboring concerns about the possibility that they could play a role in surveillance.
What about the UK?
The prospect of a programmable CBD has raised concerns in the UK. (The UK is no longer part of the Eurozone and has its own currency: the pound sterling) petition Against programmable CBD on the official UK petition website has garnered over 31,000 signatures. This was short of the 100,000 threshold for entry into the House of Commons debate.
However, the government chose to respond to the petition and stated that:
The government has no plans to program any future CBDC digital currency or restrict how money is spent… Neither the Bank of England nor the government will be able to program central bank currencies or restrict how money is spent. If there is an end-user demand for programmable features, any programmable features will be designed by private portfolios, and users will have the option to use them if they wish.
This is a very different approach from that of the European Union, which is said to be considering the possibility of programming at the heart of its CBD. In the latest Bank of England advisory paper On the digital pound, we learn that:
However, recognizing the fundamental importance of trust, the digital pound will be at least as private as existing forms of digital money, such as bank accounts. Digital pound users will be able to make choices about the way their data is used.
What about the governor?
What we know about the UK model so far is that it is likely to be akin to a public-private partnership. To access the digital pound, you will use a virtual wallet from a third-party provider.
You will also have to share a limited amount of personal information with your wallet provider. This is necessary to verify your identity and prevent financial crime or fraud. According to the Bank of England, you will enjoy the protection of data privacy regulations, and your personal information will not be shared with the bank or government.
From what we know, the euro equivalent wouldn’t be too different. According to the latest news Evolution report“Moderated brokers perform all roles faced by the end user such as opening… wallets and associated payment processes.”
However, the European Union is still studying how much privacy it will offer users of the digital euro. I have issued a file a report Select options.
BeInCrypto has reached out to the European Central Bank for comment on the future of its central bank digital currency.
Following the Trust Project’s guidelines, this featured article features opinions and perspectives from industry or individual experts. BeInCrypto is dedicated to transparent reporting, but the opinions expressed in this article do not necessarily reflect those of BeInCrypto or its employees. Readers should verify information independently and consult with a professional before making decisions based on this content.