The upcoming launch of China’s digital currency and Facebook’s proposed Libra project seem to have created awareness for policymakers and financial institutions about which money would have the upper hand in the global financial system in the future.
In view of this, the Association of German Banks (Bankenverband) recently published a paper stating that the European economy needs a ‘programmable digital euro.’
The association, which consists of more than 200 commercial banks, outlined the role that banks and government could play in ensuring a sustainable financial system for the European economy, as well as developing an environment where these financial institutions can effectively operate alongside private crypto-related firms.
Specifically, the paper outlines that the proposed new financial system could only work effectively when the right authorities create a common ground for it in line with existing competition law.
Regardless of the banks’ stand on developing a digital euro, they warned that the launch of a digital currency should not endanger the current financial system, as they urged the regulators to establish a pan-European payments platform for the ‘digital euro’ that is interoperable with fiat currencies.
According to the Bankenverband, regulators need to create a public trust for the digital euro by establishing an uncompromising regulatory framework that would govern the issuance, custody, as well as integrating the new rules with existing banking rules.
As per the paper, the government needs to establish a system that would facilitate the collection process of users’ information for the digital euro, thus making it easy for users of the digital euro to be identifiable.
The association stated that the information collection system needs to be secured and should be in line with the standard already being used by traditional financial institutions, to help combat money laundering and terrorist financing.
In a similar development, Coinfomania reported last month that the Bank of Canada is considering the launch of its digital currency, to help curb the threat of cryptocurrencies on financial systems.