A total of 130 central banks around the world, including the European Central Bank (ECB), are exploring, testing and in some cases already launching an alternative to legal tender, known as CBDC (Central Bank Digital). Currency). These digital currencies are the response of states to cryptocurrencies, and especially to 'stablecoins', stable cryptocurrencies backed by a hard currency or material goods. CBDCs open a new paradigm to the extent that they will involve a different distribution of roles than the current one in the payment methods industry, with a more relevant position of central banks and with use cases different from those we currently know.
Three experts on the subject spoke about the revolution they represent and their impact on the financial system in a new edition of the 'Diálogos en La Vanguardia' forum, held in collaboration with Minsait, an Indra company: Miguel Ángel Fernández Ordóñez, former governor from the Bank of Spain; Álvaro de Salas, director of Strategy and Innovation of Financial Services at Minsait, and Antonio Macías, director of Payment Methods for Merchants at BBVA in Spain The trigger that led central banks to promote their digital currencies, according to Álvaro de Salas, was the announcement in 2019 by Facebook (now Meta) of the launch of its 'stablecoin', and not the birth of cryptocurrencies such as Bitcoin, which date back to 2009. Due to their volatility, lack of transparency and low acceptance, cryptocurrencies do not Backed securities can be considered a more or less sophisticated or risky investment mechanism, but not a means of payment. However, the fact that Mark Zuckerberg wanted to enter that field put the world's main central banks in check. “The central banks of strong currencies saw that there could be a risk of threat to the monetary sovereignty of the states,” concluded the Minsait director. Meta did not go beyond the announcement, but the progress of stablecoins is reflected in a recent report by Morgan Stanley on the de-dollarization of money, cited by Fernández Ordóñez, according to which the group of supported virtual currencies already registers more operations in money than Visa.
In the case of the ECB, De Salas pointed out, the project to create the digital euro seeks not only to guarantee this monetary sovereignty against other private currencies that could replace the state as owner of the legal tender; It is also a strategic objective to not depend on American payment structures. “In Europe we live on borrowed money in stores, because we always do it against US brand schemes,” he argued in reference to companies such as Visa or MasterCard, adding that, in the current context, this is an issue delicate. “In the event of a trade conflict or cyberattack, which could cut off this flow, it is necessary for Europe to have an alternative for payments beyond cash,” he concluded.
There are countries that are going at cruising speed with their digital currency, such as India, which will probably have the digital rupee up and running in less than two years, or China, which continues to pilot tests; or others, like the US, which are going very slowly, not only due to the pressure of the banking lobby, but also because of the 'stablecoins', to the point that Donald Trump has assured that if he is president he will not authorize the digital dollar. The ECB, for its part, is moving forward decisively, but prudently, as agreed by the speakers. At the end of next year, explained the former governor of the Bank of Spain, the ECB will decide whether or not to continue with the process of creating the digital euro. If carried out, it could be a reality among European citizens around the year 2030. The digital euro, as Fernández Ordóñez was responsible for reminding us, already exists, but only for use by banks. What is being done now is designing an infrastructure so that citizens and financial and non-financial companies can access that money.
The challenge, as the three experts highlighted, is enormous because it is a disruption. For this reason, Antonio Macías advocated for “making a disruption that is as least disruptive as possible, that is technologically simple and understandable,” since, otherwise, citizens will not adopt it. “Let's put something on the market that is convenient for everyone and reuse the current payment infrastructures and all the experience that exists as much as possible,” stressed the BBVA representative. In this sense, he gave the successful case of Bizum as an example. “A little more than 50% of the immediate transfers made in Europe are Spanish and that is thanks to Bizum,” he stated.
Bizum, he explained, is a solution created in Spain from public-private collaboration, where the ECB has established the infrastructure rules and private agents have collaborated by interconnecting. “Let's use what there is, what works,” she insisted. In this sense, he assured that when the Bizum button appears on an e-commerce page, without having carried out any marketing campaign, between 20% and 30% of payments go there. “Why don't we include the potential digital euro in the Bizum button?” Macías asked.
A few months ago, the BBVA executive continued, the sector did a proof of concept to see what would happen if a CBDC were added to the current infrastructure, both in the transfer of funds and in processing payments to retailers. It was tested, he said, in all use cases and all operations ended up being settled in the clearing house. “This de facto sovereignty has already been built in Europe, we must make it evolve so that this alternative to cash circulates through it,” emphasized the director of Payment Methods for Merchants of BBVA in Spain.
De Salas, for his part, explained that today there is already technology that allows payments to be made based on what they call a bearer digital instrument. This means that by bringing one mobile phone to another or a smart card to a mobile phone, money is transferred while preserving privacy equivalent to that of cash payment. Payments, he added, already have an enormous level of technological development. “We are close to the Holy Grail of what they call invisible payments,” he added.
Within the digital euro project, which the ECB seeks to be easy to use, secure, fast and reliable, there are two independent designs. One is the online digital euro, as an alternative to existing payments that today require connection (transfers, card payments, 'e-commerce'), and another is offline due to proximity, equivalent to physical money. “Where Europe plays the most is offline,” De Salas highlighted. With the online euro, which will be deposited in an ECB account, the citizen will have an equivalent to the IBAN but a digital euro, as is now the case with bank accounts, to be able to operate. In the case of offline, the digital euro will be deposited in a secure hardware element, be it a mobile phone or a smart card. The closest thing to carrying cash in your wallet. So much so that the director of Strategy and Innovation of Financial Services at Minsait explained that, for the offline version, if that cell phone or card fell into the sea it would be as if the wallet had fallen.
Whatever and whenever, the existence of the digital euro will not mean the disappearance of cash. “There will be infinite coexistence over time, because cash will continue to exist,” said Macías, to which Fernández Ordóñez added that the ECB has decided that it will not touch any of the physical money, although many economists advocated ending it. “The people are going to decide,” he said. De Salas expressed himself in similar terms, for whom it will be the citizen who will decide his preference or not on the offline euro compared to today's physical one, or on the online one with respect to current options. “And that is not going to be easy,” he concluded, but not before ensuring that the ECB will have to make great efforts to raise awareness and explain. Generational change and the “inexorable dematerialization of the economy” may be elements that help its adoption.
The digital euro will also be a new paradigm for the financial system. “It will mean an extraordinary structural change in monopolized and specialized banking activities, which are payments and credits, and in the issuance of money,” said the former governor of the Bank of Spain. In his opinion, CBDCs open possibilities in three areas: stability, liberalization of the banking sector and the management of monetary policy. Since the digital euro cannot go bankrupt, because it is money and not a promise of money, banking crises are over; the bubbles would also end. The question, he said, is how to replace one with the other. “Should it be left to the market? "We will have to do it with great care, letting the banks transform, separating their companies...", stated the expert.
For the former governor, European citizens are interested in having digital euros and not bank deposits. “To save the banks, European citizens have spent 267 billion euros, money that could have been dedicated to healthcare, for example,” he emphasized. Therefore, the ECB cannot make the mistake of continuing to help banks to do the same as they have done until now. “Banks must be helped to compete, to separate the payment and credit businesses,” he added. As in any structural reform, he warned, banks will have to transform. “The transition is essential and it is a mistake to delay the moment. It is not possible in the future, once we have an alternative, for money to be combined with risk. Money must be a safe asset,” concluded Fernández Ordóñez.
