Digital euro can’t be programmable: Eurogroup
The asset must be automatically convertible, but its use can't be restricted.
The European Council’s Eurogroup said on Jan. 16 that any eventual digital euro cannot be programmable and must be automatically convertible to traditional assets.
Digital euro must not be programmable
The Eurogroup said that the digital euro “cannot be a programmable money.”
Though the digital euro must be automatically convertible to the traditional euro at any point, the asset cannot be programmable so that holders are prevented from spending it on certain purchases or at certain times.
This is likely of interest to crypto developers considering how a digital euro might be integrated with DeFi applications and exchanges. Though the EU never confirmed that the digital euro would be built on blockchain, it suggested that decentralized solutions, including distributed ledger technology (DLT) were under consideration.
Crypto developers and their applications will undoubtedly be able to accept the digital euro. However, the Eurogroup’s insistence on a lack of programmability means that those developers may prefer to continue using blockchain-based stablecoins such as Euro Tether (EURT), Stasis Euro (EURS), and Circle’s Euro Coin (EUROC) and the blockchains they are built on, which are highly programmable via smart contracts.
The Eurogroup also distinguished between user-programmed payments (presumably scheduled payments) and programming that might broadly control the asset’s movement. The former would be supported, but the latter would be prevented.
Design and features are “political” decisions
The Eurogroup’s concerns over programmability are one of many design points the collective described as “political” in its announcement today.
The Eurogroup said that the digital euro’s features and design require “political decisions that should be discussed and taken at the political level.” It suggested that the design of the asset could strengthen the EU’s position in geopolitics — improving its strategic autonomy and independence due to the importance of payment systems.
The group noted several concerns related to that goal, which must be balanced. It observed that a digital euro should be widely available but should complement cash instead of replacing it. It additionally noted that a digital euro should allow for anti-crime and anti-fraud monitoring while also providing trust and privacy to users.
It noted that holding limits should be implemented to protect the EU’s financial stability and that public and private participation should be balanced. It further noted that EU-specific needs should be balanced against interoperability with other CBDCs.
The creation of a digital euro requires participation from several different EU organizations. The Eurogroup said that if a digital euro is created, the European Parliament and the European Council must create a legal basis for the asset. Furthermore, it said, the European Commission would need to create a legislative proposal.
Though the European Council published today’s statement, the details result from discussions between members of the Eurogroup — an informal meeting group that includes finance ministers in the eurozone.
Currently, the digital euro is in the investigation stage. Reports from December suggest that the EU will decide in fall 2023 on whether to issue a digital euro. The asset will be issued much later if the EU decides to proceed.