Many central banks spanning the globe have advanced the concept of the implementation of central bank digital currencies (CBDCs) in their regions. Interest has been demonstrated by the European Central Bank (ECB) and it has even released a report elaborating on the danger of not establishing CBDCs.
Recently, the Spanish Socialist Party (PSOE) of Spain suggested the formation of a group to research the benefits and challenges of introducing a digital euro in the country as a Non-Law Proposition. This proposition came to be because of the extreme decline in the public’s use of physical cash.
In brief, CBDCs are simply digital forms of current currencies. CBDCs have the potential to provide the government with a remarkable capacity to stimulate the economy, enact certain schemes like universal basic income, and potentially collect taxes in real time.
During times of economic crisis, this technology could even permit central banks to deposit direct payments to citizens. The introduction of these extra payments can be kept under control with expiration dates on the money or restrictions on what can be purchased with the money. They would also diminish private banks’ roles in dispersing money to citizens through loans and direct payments. Most of these ideas are still just theory and opinion but no matter the implementation plan, CBDCs will give way to a much more flexible system.
A problem with this new system could be the invasion of privacy. With the newfound control over money distribution, the government would also have the capability to reach the money in citizens’ accounts at any time.
There are also concerns that governments would attach a set of conditions to the payments citizens are eligible to receive. These apprehensions are important and should be discussed to the fullest extent in order to fully understand all possible repercussions of the new system. Despite these drawbacks, it looks like CBDCs will become a reality in the near future.
The Spanish Socialist Party declared that its aim in adopting CBDCs was to, “restore money as a public good, more stable and under democratic control.” The scene of CBDCs is still uncertain in Europe. It is unknown if or how a Spanish digital euro would work and how it fits into the scheme of plans set by the European Central Bank. One important development is that the ECB selected the Bank of Spain along with its stock market regulator (CNMV) to supervise “crypto-assets” within the country.
Eyes will be on Europe as developments of CBDC continue both from the European Central Bank and from individual countries, such as Spain, that are pushing harder for the adoption of digital currency. It will be interesting to see how the digital currency schemes play out over time.
Lucas, Gavin. “Spain Proposes New Digital Euro.” Coingeek, 5 July 2021, https://coingeek.com/spain-proposes-new-digital-euro/.