the digital euro arrives (and it will be a revolution) – Corriere.it

From the Cathedral of Orvieto to the Roman account: how the Digital Euro will be part of our lives It has not been an easy year for cryptocurrencies. Between collapses in their value and outright scams, what are considered not only powerful innovations but also potential forms of investment, have turned into an equally big question mark. So much so as to create quite a few confusions among citizens who now hear of the digital dollar, digital yen and digital euro. Well it must be said that these are completely different tools. But what is the digital euro? In fact, this year the European Commission will present the draft regulation that will give the European Central Bank (ECB) (which has been working hard on this issue for some time) the powers to manage in full autonomy a digital currency that will arrive directly in our e- wallet (and not only), as described in it The Economy of the Courier of 9 January last.

Is there a central form of control?

A digital currency is different from instruments of credit or investment. The euro is a security issued by the ECB and guaranteed by it; it is therefore the purest form of correspondence between title and value. All the rest, including our bank accounts and especially digital money, are more or less private issues of debt securities that are due from the entity that issued them which in return offers a service or a return on investment. To understand the difference with a cryptocurrency (the best known is bitcoin) one must take a leap back to the 1300s. In Orvieto, near the Cathedral, there is the Torre del Maurizio built precisely in the 1300s. It had a precise function: to scan the hours during the construction of the Cathedral. Maurizio was the name given to the bronze automaton who struck the bell with a hammer in order to communicate that another hour had passed. And that therefore the notary had to be ready to pay the workers. In this way, there was a registration of the time event which generated an entry in the register and, consequently, a payment. This can be defined as a form of blockchain: a register in which transactions are time-stamped and secured in a sequence, encrypted, protected and linked to each other so that their path can be traced. The key point is whether the notary (i.e. a central form of control) exists or whether the workers self-manage the payments.

The speculative nature of cryptocurrencies

TO difference from fiat currencies issued by central banks, there is no centralized entity that issues cryptocurrencies; rather, their value derives from the exchanges and passages of this currency, which become the links of this “chain”. As a result, cryptocurrencies are highly speculative in nature. Something that recalls the black tulip race of the 1600s, where the generation of value was entrusted to ephemeral concepts and generic and hypothetical values ​​attributed by each individual and added together. If it seems completely random to you, that’s because it is, but at the same time, blockchains are the most advanced form of that distributed intelligence that will be the basis of the internet of the future, that of the metaverse, so to speak. You may be wondering: who controls and governs the blockchain? In truth, it’s a bit like asking who controls the Internet: everyone and no one.

The stablecoins

Then there is another category of cryptocurrencies, called stablecoins (stable electronic currencies). Stablecoins are issued by private individuals, but their stability is guaranteed by solid securities. In other words, their value will be correlated to that of securities guaranteed by central authorities: the stability of the currency is normally certified and guaranteed by an underlying asset. This basis can correspond to a basket of a single currency, for example the euro or the dollar, or it can be a basket of government bonds, other assets considered safe and which therefore make stablecoins much less risky than cryptocurrencies, but still always retaining a certain degree of risk. Why were two stablecoins the most dramatic crashes last year? Because in that case the guarantee was only an algorithm (algorithmic stable coins) which guaranteed one cryptocurrency with another, a sort of perpetual motion that does not exist in nature or even in finance. Hence the need for rules. In 2022, Europe adopted the regulation on crypto-assets markets (known as MiCA, Markets in Crypto-assets) which we will soon see come into force: the first legislation in the world that makes a systemic classification of all electronic currencies and regulates them. Stablecoins that promise to be investment instruments with greater stability than cryptocurrencies will need to be licensed and regulators will check that the underlying collateral is sufficient (an algorithm doesn’t seem like enough). Even those who issue cryptocurrencies must register, a series of general information (white papers) must be provided to make the consumer aware of the risks, compared to stablecoins, this is a much lighter regulation, which enhances the freedom of the individual to assume the responsibility to agree to trade risky assets.

Utility tokens and the smart contract

The MiCA regulation also recognizes the category of so-called utility tokens, a sort of voucher for financing oneself without resorting to real investments, offering access to a service in exchange. In order for them to fall into the category of movable and financial assets, they must be fungible. For example, the NFT of an artwork does not fall into this category because it is non-fungible, unlike the utility token.

The smart contract

Another upcoming innovation is the smart contract

, the smart contract. A practical example of this contract could be the interaction between the electric car and the charging station: after connecting the car to the station, the user does not have to carry out any further operations since he has already adhered to a contract in which he has instructed your vehicle to communicate with the charging network, to exchange useful information and to recharge when necessary. Smart contracts will be regulated for the first time ever by the Data Act (European Data Law), electronic coins will also be programmed to execute this type of automated contract, which will become the norm: it will be the end of useless and repetitive ones renewal requests and authorizations. Of course, the user can terminate a smart contract at any time.

The digital euro

So which of these categories does the digital euro belong to? None of the above. In fact, we are talking about a nascent new category (it is called Central Bank Digital Currency CDBC): an electronic currency issued and guaranteed by the European Central Bank. All aspects of operation will precisely be regulated by it, which will then be the ultimate entity to supervise the clearance between the various entities that will distribute the digital euro, as occurs today in the interbank system. The digital euro is the next step in the advancement of the European payments system, which is already the best in the world and, as we reiterated two weeks ago, has facilitated the generation of unicorns on the payment system – not only in Italy with Nexi and Satispay but also in other countries such as Ireland, where a truly interconnected has also created a real industrial model. This also means that banks and other traditional players are not leaving the scene at all: the distribution of the digital euro will be guaranteed by the intermediaries we know for paper money, i.e. banks and other credit institutions, via digital ATMs. In the last paper published last December, the ECB explained that the form of supply of the digital euro for customers will be that of the retail circuits and that therefore the digital euro will be an additional tool available to citizens that will revolutionize the way where the banks operate. The digital euro will therefore become our right as European citizens, while the banks and the entire payment chain will continue to manage the services that revolve around it. Why is the digital euro innovative? Because it is a currency not linked to a contract with a specific digital money provider, or a company that provides credit, such as a bank or cryptocurrency wallet: anyone can hold digital euros just as anyone can hold banknotes.

The Roman account

Perhaps the most banal example to understand the change we are going through is the famous Roman account. In other words, a single account is created and then divided with the consequent exchange of money. Tomorrow, regardless of how you choose to store them, you will be able to exchange digital euros by creating an immediate peer-to-peer transfer and collectively pay your bill in an instant. The key word is “interoperability”: the digital euro is a digital free currency that is free from any other payment system, but obviously remains interconnected and compatible. Furthermore, for exchanges of small amounts of money up to a certain limit, work is done to ensure anonymity exactly as it exists today for cash payments. Obviously, beyond the limit, the obligations of the anti-money laundering legislation will take effect. The digital euro is the dematerialization of the traditional banknote as it is universally accepted but will be smarter and safer. We may not be able to hear Maurizio ring the bell to warn us of the arrival of a money transaction in our e-wallet, but we will certainly be able to immediately receive all the money advanced for a Roman account.

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