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The contact of the two worlds - the traditional financial market and the cryptocurrency sphere - is difficult to implement in reality. The market already encountered obstacles when it tried to give Bitcoin the status of a fiat currency. Some enthusiasts want to conduct a similar experiment with the euro, which could turn the entire financial market.
Recently, the European currency has been very turbulent. It experienced serious volatility due to problems with a slowdown in the eurozone economy and the UK's exit from the EU. At the moment, the situation has stabilized, but experts fear a more serious flurry of economic and geopolitical difficulties that could completely undermine the euro.
One of the former employees of Deutsche Bank proposes to create a digital euro as an alternative to the fiat single currency. The first step towards innovation could be the introduction of a bank deposit, fully secured by the ECB. The regulator could get the money needed to cover the deposit by purchasing outstanding eurozone government bonds. In the future, this deposit will become the digital money of the central bank. They will be transferred both from one private person to another, and from company to company using blockchain technology.
Some analysts believe that in this case, the euro will become a stable cryptocurrency (stablecoin), fully secured by government bonds. Only the ECB will be responsible for issuing these means of payment. The regulator has the function of protecting new money from any fraud.
The money supply will be able to increase due to the further purchase of state bonds, the former chief economist of Deutsche Bank said. At the same time, it is necessary to assess the development prospects of both the eurozone and the single currency. In such a situation, the money supply of the digital euro will increase taking into account the expected growth potential of the eurozone economy.
The advent of digital euro will radically change the work of commercial banks. Their functions will be reduced to accepting deposits from the public and issuing loans to investors. The work of banks will become identical to the activities of investment funds. The activities of the regulator will also undergo revolutionary changes. The central bank will no longer be able to use interest rates to manage the creation of credit money, experts said.
The transition to a virtual euro currency will help reduce the debts of the eurozone states, as well as protect the euro itself from unnecessary shocks. A serious side effect of this transition may be the fact that the market will lose government bonds worth €7 trillion. At the same time, the public debt of all eurozone countries will fall below 25% of gross domestic product. Thanks to this, each country will be able to conduct a reasonable fiscal policy.
According to preliminary estimates, the digital euro issued by the ECB and provided with the means of the regulator will be much stronger than usual. An innovative currency will be able to compete not only with the dollar, but also with other digital assets. In the future, it will be able to achieve the status of a global reserve currency, the former representative of Deutsche Bank said.
The new single currency, which appeared at the intersection of tradition and innovation, could take the best of both worlds. It is assumed that the digital euro will be characterized by the reliability of fiat currencies, as well as flexibility and openness to the new - qualities inherent in virtual assets.
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