Very soon, banking giants such as Santander, BBVA, CaixaBank, Bankia and Banco Sabadell, five of the largest banks in the European Union, will begin to implement pilot tests in Spain on the digital euro, the new currency that will be issued by the Bank. European Central.
The main banking entity in Europe, the European Central Bank (ECB), will begin pilot tests at digital euro, a digital currency issued by the central bank (Central Bank Digital Currency - CBDC). The tests will be carried out in Spain together with five of the largest and most important banking entities in the region and payment services companies such as Iberpay. The introduction of a digital currency to the financial ecosystem of Spain and Europe is intended to keep the region at the forefront of innovation and digital transformation that is being experienced worldwide.
For some time, the ECB has been developing tests of the digital euro through the Central Banks of Italy and France. Now, the initiative is joined by Spain, who through Iberpay and the banks of Santander, BBVA, CaixaBank, Bankia and Banco Sabadell, will begin testing the digital currency. For the tests, Iberpay will be the payment company in charge of centralizing the initiative, thanks to its successful track record in the sector. Iberpay will receive the tokens issued by the European Central Bank and will distribute them among the different banking entities participating in the project. In turn, these entities will distribute the tokens to their clients and users.
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A race between several nations
Major powers such as China, Japan, Russia, and probably the United States, are developing a digital currency as part of their strategy to dominate the global financial system. Due to this, the European Union sees the need to develop a digital currency with the potential to confront the innovations presented by other nations, and that could call into question the region's ability to guarantee its economic stability.
A digital currency issued by China, for example, would have the potential to negatively impact the Eurosystem, by allowing money transactions to be carried out without the due control of European laws, the same as other private digital currency initiatives, which could be done with public monetary sovereignty through its digital infrastructures of global order. Facebook's digital currency project, Pound, and other implementations like Alipay y WeChat, present themselves as strong competitors with the potential to position themselves as issuers and managers of universal private currencies.
Due to this, the European Central Bank is obliged to issue its own digital currency; one that guarantees the accessibility of central bank money to citizens, and that guarantees the permanence of the money in the hands of the entity and not of private corporations. Likewise, the importance of the issuance of a digital euro plays a fundamental role within European economies that have less cash available every day to make payments.
Importance of the digital euro
A digital euro will facilitate everyday transactions, payments to retailers for purchases, money transfers between family members, and much more. The digitization of this currency will allow the current financial system to be improved and optimized, so users and financial entities in the region will be able to make payments immediately, moving money between entities or individuals instantly.
Likewise, the digital euro will allow small transactions to be carried out, even fractions of a euro if necessary, something that is not possible with fiat money. The professor of Finance at ICADE Business School, Luis Garvia, pointed out in an interview that one of the main advantages that the digital euro offers over the fiat euro is as a unit of account to “count very small values.”
The digital euro also allows transactions to be carried out for very small commission fees, compared to traditional financial instruments. Garvía also pointed out that conventional international transactions use mechanisms such as Swift, where a transaction can take up to 2 days to complete. Faced with this reality, the finance professor argues that "traditional money is not agile in international transfers." On the contrary, he highlights the advantageous properties of cryptocurrencies, and digital assets to carry out immediate transactions with very low commissions.
Possible effects of the digital euro
Garvía points out that, due to the potential that digital assets present, such as the possibility for users themselves to manage and control their own money, the figure of the banking entity may disappear.
"As the money can be controlled by the user themselves, the intermediation function of traditional banks disappears."
In the opinion of the finance expert, the issuance of a digital euro will also mean greater monetary control, something that will undoubtedly be positive for the system and public policies, by allowing greater efficiency and awareness about what we do with our money. Therefore, there will be better management of our resources and finances. In the case of individual users, Garvía points out that the use of the digital euro will be similar to the use of traditional euros deposited in a bank account, although these can be operated over the internet with greater ease and security than traditional ones.
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