With the backing of Europe’s biggest economy Germany, the European Central Bank is mulling over a digital euro that could be guaranteed by the central bank, in turn potentially offering greater security than by commercial banks.
But the ECB has stressed that a digital euro would not replace cash and should not be seen as a cryptocurrency.
And while one bitcoin is today worth around US$60,000, the ECB has noted that one euro must remain one euro.
Consumers across the country already widely use mobile and online payments, but the digital yuan could allow the central bank – rather than the big tech giants – greater data and control over payments.
The issuance of a cryptocurrency like the bitcoin is regulated by an algorithm, not by a central bank’s monetary policy committee.
Regarding the UK project, “as cryptocurrency investors ride a wave of speculation, the government will be keen to distance itself from what is still seen as the wild west of the payments world”, noted Ms Susannah Streeter, senior analyst at stockbrokers Hargreaves Lansdown.
The ECB seems to be considering a digital euro more because of the threat posed by stablecoins, like the planned unit Diem backed by Facebook, rather than the bitcoin.