The ECB should grant e-money issuers access to central bank reserves, says Monerium.
Consensys-backed e-money issuer Monerium thinks the route to a digital euro is simpler than the European Central Bank suggests.
In summer 2019, Monerium had become the first company worldwide to receive a license from Icelandic regulators as part of a new European regulatory framework for e-money services across the European Economic Area. It provided fiat payment services using the Ethereum blockchain, and later partnered with blockchain protocol Algorand.
In its response to the ECB, Monerium argues that all Europe needs to do is to recognize it already has “a proven form of digital euro.”
In 2000, the European Commission had described e-money as a “digital alternative to cash,” issuing a directive which defined it as “technically neutral,” an “electronic surrogate for coins and banknotes.” In light of this framework, Monerium claims:
“The only thing that the ECB needs to do to give e-money comparable status to physical cash is to grant e-money issuers access to the ECB’s reserves.”
Embracing existing e-money issuers is preferable to the ECB directly issuing digital currency to households and non-financial corporations, in Monerium’s view. Direct issuance would entail a radical overhaul of the existing system, in which the central bank chiefly interacts with regulated financial institutions like commercial banks.
To back up its case, Monerium points to a report from two International Monetary Fund economists, which proposed that non-bank providers could issue digital money with the central bank’s backing in order to roll out a synthetic central bank digital currency (sCBDC).
Europe’s existing e-money framework, in Monerium’s view, is already fit for the IMF’s key criteria for a stable digital currency. To move from e-money to an sCBDC, following the IMF’s lead, would require the central bank to grant e-money issuers access to ECB reserves:
“Such access would be consistent with preserving a 'level playing field between electronic money institutions and credit institutions' as stipulated by the e-money directive.”
As reported, the ECB has made it clear that it will come to a decision on whether or not to launch a digital euro project towards the middle of 2021.
An ECB report in Oct. 2020 outlined the scenarios and requirements for a future digital euro. Crucially, the central bank considers a CBDC to be a matter of “strategic autonomy” for the Eurozone, at a time when stablecoins from private and overseas actors threaten to “undermine financial stability and monetary sovereignty in the euro area.”