The Association of German Banks “Bankenverband,” released a position paper titled, “German banks say: The economy needs a programmable digital euro!” on October 30, 2019, which calls for the creation of a government-approved digital euro and rejection of decentralized cryptocurrencies.
The Association has made eleven observations about what must be done to ensure the banking system remains competitive, and how the government can help to maintain the stability of the monetary system during technological changes. They are as follows:
- Cryptocurrencies can destabilize financial systems and hence, must be rejected.
- Programmable Digital currencies have great potential for improving banking operations.
- An EU-wide payments platform should be created through a programmable account and cryptography-based euro.
- An EU-wide supervisory and regulatory framework should be created for digital money. Existing banks should be allowed to handle digital euro transactions.
- Regulators and politicians should work together to ensure regulations should not be so severe that they stifle innovation.
- EU lawmakers should ensure an EU-wide uniform approach towards innovation.
- Digital euro should have a global identity standard. Its value should be the same across the world.
- Most advanced data protection strategies must be in place to protect digital euro from hackers.
- The legal status of payment modes of digital euro must be clarified.
- German tax law should determine whether digital euro is a currency or economic good for taxation.
- Deposit guarantee schemes must be announced for digital money to encourage its use among common people and build trust in them for it.
Thus, German banks want the speed and ease of transactions associated with digital currency without the volatility, which has been the bane of cryptocurrency. Thus, in the future, fiat currency may be replaced entirely by government-approved and regulated cryptography-based digital currencies; and transactions can be recorded on a blockchain.
The urgency for a digital euro seems to have increased after China announced its plan to launch a digital Yuan and a nationwide blockchain initiative.