2 min video, are we soon to see a CBDC — Digital Euro?
5 of Europe’s leading economies have called for a ban on stablecoins being used in the private sector until there is some form of regulatory oversight.
These calls are being expressed under the pretense to protect consumers and over fears of money laundering however, it is a digital currency that may well seriously dent sovereign states’ ability to manipulate and control their economies.
Given almost Zero interest rates, governments have lost a key monetary tool perversely digital currencies could provide them with another lever to control monetary growth by imposing a transaction fee if inflation rises as a way to stop spending without raising interest rates. A Digital Currency also enables targeted giving of money — helicopter economics — not similar to furloughing but more focused on those that really need help.
Could this recent announcement also pose a threat to the fast-growing DeFi sector as it offers a number of ‘seigniorage-style’ coins such as $110 m Reserve $479 million MakerDAO’s Dai, $640million Synthetix which are managed using algorithms and smart contracts? This is because the EU only want stablecoins that are backed 1:1 with actual Euros
Meanwhile the former MD of the IMF now head of the ECB, Christine Lagarde, told Bloomberg “it would soon be made public whether they will move forward with a eurozone-based digital currency.” Although she did add that “We have a responsibility to ensure that our citizens have a choice and cannot be excluded from the payments ecosystem due to the unilateral actions of others.”
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