The Digital Euro Could Be Launched by 2026

The Digital Euro Could Be Launched by 2026

by | May 16, 2022 | Cryptocurrency

According to Fabio Panetta, a senior official at the European Central Bank (ECB), a digital euro could be issued within the next four years by the European Union (EU). A potential first use would be peer-to-peer payments.

Due to concerns about Russia’s war against Ukraine and the rise of private stablecoins such as Facebook’s now-abandoned Libra, the timeline for the central bank digital currency (CBDC), has been moved back and forth.

What would the digital Euro be used for?

At an event at the National College of Ireland, Fabio Panetta, an executive board member of the European Central Bank, or ECB, has said: “The idea would be that let’s say, four years from now, we will be ideally ready to issue the digital euro,” and also expressed his optimism that the CBDC could be launched within the next four years, although it will be a complicated process that hasn’t been done before. 

Panetta suggested that a peer-to-peer (P2P) payment solution, which allows transactions between friends, could be the first test ground for the new technology before it spreads to other areas such as online payments or business payments such as physical and online shops.

He said that a P2P payment system that covers large numbers of users in the whole euro area could be a fertile ground for the adoption of a digital currency. Research has shown that the application would have the greatest impact on early adoption.

The ECB began a two-year investigation phase in October to examine issues such as which use cases should be prioritized. However, the ECB is still not sure if it will issue a digital currency. Panetta previously stated that the realization stage, which is due to begin late next year, could last for three years.

Christine Lagarde, President of the ECB, stated in March that the sanctions imposed by the war in Ukraine were a reason to accelerate the plans. However, other EU officials Monday suggested that they are letting their feet off the pedal.

We also have to note that Jurgen Schaaf, an ECB advisor, stated that the EU’s research and experiments on a digital euro are not a guarantee that they will launch a CBDC.

Why is the EU researching a CBDC?

After an industry consortium led Facebook suggested its own cryptocurrency, Libra, the idea of the EU issuing its very own CBDC was born. The Libra project was later renamed Diem and abandoned.

Mairead McGuinness (EU’s financial-services Commissioner) said that there was a feeling of urgency back some time ago, due to the fears of what might happen with private providers. McGuinness said that they will not hurry the research process. They want to move fairly quickly, but  “not hastily.”

Panetta stated that recent declines in the crypto market private may be another reason to continue the project.

Stablecoins lack the regulatory safety net that banks have and are, therefore “vulnerable to runs”, he stated. He cited the crash of TerraUSD (UST) from May 9th-13th. The supposedly stablecoin was issued and backed up by the Luna Foundation Guard.

Another example of an unregulated stablecoin is Tether (USDT), which also lost its peg to the USD dollar during the same week. Luckily, the USDT quickly recovered. 

Another reason for EU’s urge to research and regulate cryptocurrency is the war between Russia and Ukraine. Following the invasion of Ukraine, the EU and U.S. implemented severe sanctions against Russia. However, there are many concerns over the role of crypto in evading sanctions. This has prompted regulators around the world to accelerate their efforts to regulate the sector.

At the same time, U.S. President Joe Biden issued an executive order regarding crypto Wednesday encouraging federal agencies to adopt a common approach when regulating the sector. He asked the government to evaluate the benefits and risks of creating a digital currency.

Bitcoin Ban Averted: Proof-Of-Work Crypto Ban Is Rejected by the EU

Bitcoin Ban Averted: Proof-Of-Work Crypto Ban Is Rejected by the EU

by | Mar 16, 2022 | Bitcoin, News

On March 14, the European Parliament discussed the effects and carbon footprint of Proof-of-Work cryptocurrencies. The EU Bitcoin ban was not passed, but the energy discussion has not ended.  

​​A rule proposal that would have effectively banned Bitcoin in the European Union (EU) has been struck down.

The European Parliament’s Committee on Economic and Monetary Affairs (ECON) voted to keep the provision out of a draft Markets In Crypto Assets (MiCA) framework. This is the EU’s comprehensive regulatory package that governs digital assets. 

EU’s response to crypto companies: MiCA

The MiCA framework was introduced by the European Commission in September 2020, as the EU executive branch responsible for proposing and enforcing laws. It is part of a larger digital finance strategy to adapt Europe to the digital age. It’s also quite different from other regulatory efforts.

For instance, the U.S. has introduced many bills over the years that directly impact the crypto space. These include tax and securities laws, but different states may have their own regulatory requirements. The country does not have a comprehensive equivalent to the EU’s MiCA. In August, the country’s most comprehensive bill regarding crypto regulation was presented. China had already banned crypto trading and mining in 2021. However, it was still working on its own digital currency, the digital yuan.

MiCA covers cryptocurrencies such as Bitcoin and Ether, as well as stablecoins. The proposed framework does not cover digital currencies issued by central banks (CBDCs), nor crypto assets like security tokens, which might be considered financial instruments such as securities, deposits or treasury bills.

Although the promise of a passportable license to crypto asset service providers sounds appealing for established crypto firms that want to establish in the region, industry participants are concerned about the impact MiCA may have on the EU’s digital asset market.

EU’s Parliament voted on the crypto proposal

This Bitcoin ban proposal was added to the draft last Wednesday. It sought to limit cryptocurrencies powered using an energy-intensive computing process called proof-of-work (PoW). The proposal was met with heavy opposition by crypto advocates around the world. 

After the Bitcoin ban was opposed by the committee, Stefan Berger, member of the EU Parliament, and rapporteur for MiCA, tweeted: “ECON committee approved my #MiCA report. A good day for the crypto sector! The EU Parliament has paved the way for innovation-friendly crypto regulation that can set standards worldwide. The process is not over yet; Steps still lie ahead of us.”

The vote on the provision, commonly known as the Bitcoin ban, was close, and a small majority could defeat it. The proposal required that all cryptocurrencies be subject to the EU’s “minimum environmental sustainability standard with respect to their consensus mechanism.”

The rule suggested a phase-out plan for popular proof-of-work (PoW) cryptocurrencies such as Bitcoin and Ether that would allow them to switch their consensus mechanism to less energy-intensive methods like proof-of-stake (PoS).

While plans are in place to make Ethereum a proof-of-stake (PoS) consensus system this year, it is not clear if the same will be possible for Bitcoin.

The MiCA draft will be subject to a “trilogue” after the vote of the Parliament. This is a formal round between the European Parliament, Commission and Council.

Can renewable energy sources save Bitcoin?

Experts in renewable energy see two possible ways that crypto can be used to address power consumption concerns, first, by increasing demand for renewable energy sources. Second, by using blockchain technology to interact transparently and transparently with power grids in an auditable and measurable manner.

A small majority of members of the monetary committee voted for a compromise calling on the European Commission to propose alternative regulations. This is the EU’s executive arm that proposes new legislation.

“By January 1 2025, the Commission shall present to the European Parliament and to the Council, as appropriate, a legislative proposal to amend Regulation (EU) 2020/852, in accordance with Article 10 of that Regulation, with a view to including in the EU sustainable finance taxonomy any crypto-asset mining activities that contribute substantially to climate change mitigation and adaptation.”

Some politicians and regulators around the globe have criticized proof-of-work for their concerns about energy. EU leaders are worried that renewable energy could be used to sustain cryptocurrencies such as bitcoin, instead of being used for national purposes.