Digital currencies replacing bank notes
#6Jul | 4 keys to understanding what digital currencies are replacing paper banknotes (and why they have nothing to do with bitcoin)
There are digital currencies, virtually unknown, quietly advancing in the corridors of the high spheres of finance with which they want to replace paper notes and cash.
If someone talks to you about digital currencies, it is likely that the first thing that comes to mind is cryptocurrencies like bitcoin.
However, there are other digital currencies, practically unknown, that are advancing silently in the corridors of the upper echelons of finance with which they want to replace paper bills and metallic money.
It is the digital version of the traditional currencies that people use every day, such as the dollar, the euro or the yuan.
At the end of June, the European Commission presented a proposal to launch the digital euro.
Under this scheme, the traditional one euro coin would have a value exactly equal to that of a digital euro.
This new currency would be issued by the European Central Bank (ECB), with a status that makes it as official as its physical equivalent.
And the banks?
In that sense, these digital currencies – which have already been implemented in several countries – are the antithesis of cryptocurrencies.
Because? Because cryptocurrencies are not issued by any central bank and their value is constantly changing.
Investors who are willing to take risks participate in the cryptocurrency market, since prices can skyrocket one day and plummet the next.
Basically, nobody regulates their value and they move freely through a technology called chain of blocks (or blockchain), while “public” or “official” digital currencies work the same as traditional money, only in a electronic format.
“With the digital euro, citizens will be able to pay in public money,” said Valdis Dombrovskis, Executive Vice President of the European Commission.
“Having a digital wallet in euros topped up on your phone – or another device – will be the same as having coins and bills in your pocket,” he added.
The final law must be endorsed by the 27 Member States of the European Union. If that happens, the ECB is expected to give the green light to a digital euro in the coming months so that it can launch in 2027.
Sources: BBC News World , July 6, 2023
July 6, 2023