The digital transformation is as fundamental as the one that occurred during the industrial revolution. It was not without reason that European Commission President Ursula von der Leyen emphasised, in her political guidelines, that creating “a Europe fit for the digital age” would be one of her priorities.
Building on this vision, we need to promote a strong and vibrant digital finance sector with a backbone of appropriate regulation and innovation at its heart. Europe must embrace financial technologies that can improve the efficiency of the financial system.
“Europe needs to deliver a secure, value-stable alternative to Facebook’s digital ‘Libra’ currency by creating a digital euro. At the end of the day, the question is not if we will use digital money, but who will issue and control it”
The objective should be to augment the competitiveness of the European Fintech sector and to develop a comprehensive regulatory framework for crypto-assets such as stablecoins. In adopting the Digital Finance Package, the European Commission has already taken major steps to accelerate the EU’s digital finance transition.
Nevertheless, Europe also needs to deliver a secure, value-stable alternative to Facebook’s digital ‘Libra’ currency, by creating a digital euro. Ultimately, the question is not whether we will use digital money, but who will issue and control it. The EU’s Digital Finance Package is a cornerstone in our financial system. We all have witnessed the digitalisation of our payment system, beginning with the credit card, going to bitcoins and culminating in stablecoins.
More than ever, European citizens as well as businesses are making use of the new opportunities offered by digital finance, for example through online payments, digital crowdfunding or peer-to- peer lending. Yet, there remain barriers to address in this market. In September, the Commission adopted a Digital Finance Package, which paves the way for Europe to become a global standard-setter in the financial sector.
The package includes Digital Finance and Retail Payments Strategies, as well as legislative proposals on crypto-assets and digital resilience. The Commission’s FinTech Action Plan is a pillar for more integrated, safer and more-easily accessible financial markets.
The current parliamentary report on “Markets in Crypto-Assets” (MiCA) is fundamental to Europe’s crypto-adaptation. It will boost innovation while preserving financial stability and protecting investors from risks. We must create a harmonised market, promote legal certainty for crypto-asset issuers and ensure a level playing field for service providers.
Crypto-assets are digital representations of values or rights, transferred and stored electronically. The global crypto market has become too big for countries and central banks to ignore; at the beginning of 2020, over 5,100 crypto-assets existed with a total market capitalisation exceeding $250bn. Previously unregulated assets, known as ‘stablecoins’, are a relatively recent payment innovation that will now be addressed by an adequate regulatory framework.
In contrast to assets such as Bitcoins, stablecoins rely on a set of stabilisation tools that minimise fluctuations. In the wake of the announced introduction of Facebook’s digital currency ‘Libra”’ stablecoins have become the subject of particularly- heated political debates.
Facebooks’ Libra is designed to be a global currency and financial infrastructure enabling cheap and convenient financial transactions. Transferring Libra money across borders will supposedly be faster and safer than sending text messages. More precisely, seven times faster than Visa-based payment systems, according to the recently published ‘Fast Pay’ White Paper by Facebook’s Novi wallet developers.
“A digital euro would be the proof of progress and integration in Europe. It is not an option, but a requirement to achieve digital sovereignty”
However, at the same time, the coin could be misused as a tool for money laundering and terrorist financing, not to mention consumer concerns over the protection of personal data coupled with financial information. The Libra Association, which mainly consisting of private companies such as Spotify or Uber, would be in control of financial transactions, and - by the way – would hoard trillions of dollars from the interest paid on the securities in the Libra reserve.
The best European answer to private currency projects like Libra is to issue a complementary digital euro. Who would not trust a central bank over a Zuckerberg? With a regulated, secure and value-stable e-euro, suitable for meeting the needs of the financial market, Europe can set standards, instead of following others.
A digital euro would be the proof of progress and integration in Europe. It is not an option, but a requirement to achieve digital sovereignty. Only with a European Central Bank that can offer citizens something more valuable than a private company like Facebook, can Europe be regarded as “fit for the digital age”.