trump’s tariffs aren’t the only thing making
other countries nervous His pro- crypto policies are also causing panic And that’s because crypto
especially US dollar stable coins could undermine their national currencies And this is why
the European Central Bank or ECB has been doubling down on issuing its digital euro with
some reports claiming it could launch as soon as October this year And chances are that we’ll
see many other countries follow suit And that’s why today we’re going to bring you up to speed on
what’s been going on with the digital euro reveal when it could launch and why an alternative
could come sooner My name is Nick Stay tuned Let’s start with a quick recap According to the
Bank for International Settlements the so-called bank for central banks almost all the world’s
central banks are exploring central bank digital currencies or CBDC’s CBDC’s will make it possible
for central banks to control how you save and how you spend your money This is not a conspiracy
theory It’s a direct quote from Auguston Castens the managing director of the BIS In a now infamous
presentation August said that central banks would have quote absolute control over how CBDC’s are
used with the details of these controls revealed in CBDC reports they’ve written And if you’ve been
keeping up with our coverage of CBDC’s you’ll know that central banks have discussed things such as
limits on holdings limits on spending using CBDC’s to replace physical cash and even using CBDC’s
to replace gold And many of these proposals came from CBDC papers written by the ECB And this is
terrifying because in contrast to other central banks the ECB’s monetary policy is not limited
to things like inflation and unemployment It also includes things like the environment and ensuring
the stability of the euro as a currency something that’s difficult to do given that it’s used by so
many countries And this means that there’s a high risk that a digital euro could someday be used to
do things like restrict how much you can travel and restrict how much can be saved or spent in
one EU country versus another Recent comments by top EU officials including ECB President Christine
Lagard about using savings of citizens to fund the EU’s military and environmental policies sound
pretty scary in the context of a digital euro A digital euro could be used to put negative
interest rates on European savings accounts something that has also been discussed in CBDC
papers This would basically force Europeans to invest that money in other things such as the
green bonds issued by the EU uh to ensure that their savings maintain their value At the same
time it could ensure that they can’t invest this money in other assets and currencies It doesn’t
help that Christine confirmed in a 2023 interview that the digital euro would be controlled But how
did we get here if you’ve been keeping up with our coverage of the digital euro you’ll know that
the ECB and most other central banks have been interested in CBDC’s since 2019 And that’s when
Facebook announced it digital currency called Libra Central banks around the world instantly
realized that a digital currency launched by a social media company could undermine their
national currencies In the ECB’s case it was the 2021 crypto bull market that pushed it to
start working on a digital euro The massive crypto rally must have been a wake-up call that crypto
adoption was real and growing fast It’s funny to think that some ECB officials probably lost sleep
over thoughts of a crypto super cycle Anyways in 2022 the ECB published a few preliminary papers
about its digital euro Some of which included the seriously dystopian stuff I mentioned earlier
phasing out cash replacing gold and so on and so on And these papers even referred to commercial
banks and payment processors as quote monopolists By 2023 however the ECB had softened its tone
And this was partially because they realized they needed commercial banks and payment processors to
make the digital euro work And partially because the public perception of it was so abysmal due to
the ideas the ECB itself had proposed earlier The ECB also made minor changes to the design of the
digital euro meant to give the impression that it’s less dystopian than it really is The best
example here is conditional payments which are identical to programmability but are implemented
by commercial banks using tools the ECB provides thereby absolving them of responsibility if things
like emissions and location limits are implemented Anyhow since late 2023 the ECB has been in
the preparation stage for the digital euro And this stage involves finalizing its design
and partnering with any financial institutions necessary to launch it Contrary to popular reports
the digital euro will not launch in October 2025 Rather its final form will be revealed to EU
politicians who will then vote on whether to implement it or not By the way if you’re finding
this information helpful then let us know by watch that video you’ll know that the whole CBDC
dystopian narrative isn’t as clearcut as it seems From the ECB’s perspective cash use is going to
continue to decline regardless of whether the ECB does anything or not which is probably true The
ECB doesn’t like this because cash is technically the only form of money in Europe that’s issued by
the central bank In other words cash is the only form of public money All the other money the
digital money is technically private as it’s issued and managed by commercial banks and payment
processes As their digital payments continue to gain ground the influence of the ECB will
continue to wayne And this creates two problems The first is that most of the financial system
in Europe could eventually be controlled by commercial banks and payment processors most of
which are not based in Europe And the second is that it will make it harder for the ECB’s monetary
policy to affect the EU And you’ll recall the need to control monetary policy is high for the
ECB given that so many different countries use the euro In the ECB’s view there’s only one
solution and that’s to launch a CBDC the digital euro And this is why the ECB often refers to the
digital euro as a digital cash It is technically correct because the digital euro is a form of
money issued by the central bank just like cash However it’s different from cash for reasons we’ve
discussed earlier The digital euro gives the ECB surveillance and control over all transactions
Again the ECB has tried to sidestep this fact by outsourcing most of these controls to commercial
banks and payment processes But the ECB is the one that regulates these entities And this means that
even though the ECB is not directly in control of the digital euro per se it can easily exercise
control indirectly through the regulations on the financial intermediaries that will act as the
front ends for its users That said the ECB is planning to launch a digital euro app as well as
physical debit cards that will make it easy to buy sell and send Otherwise the digital euro will be
accessible via most banks and payment processors As we’ve mentioned in our previous videos it will
literally just be another tab in your bank account but could uh actually someday be the only tab if
the EU and the ECB get uh carried away Strictly speaking though the ECB will only handle the
issuance and redemption of the digital euro Everything else will be handled by commercial
banks and payment processors with the ECB providing the tools for them to do this Before
that though the ECB needs to provide them with a rule book that provides all the details about
how the digital euro works how it will be minted redeemed and so on and so on The last update
about the digital euro rule book was published earlier this month It reveals the most recent
version of the rule book received a staggering 2,000 comments from financial intermediaries And
these comments will be addressed in a new version of the rule book expected to be published in Q3
It’s not entirely clear when the final version will be published but the goal is presumably by
October 2025 And this is more significant than you think because it essentially means that nobody
knows exactly how the digital euro works at least not yet Objectively speaking this makes it very
difficult to support or reject its implementation And I’ll reiterate that it’s become less and less
dystopian as time has gone on In fact it’s gotten to the point that the ECB is open to allowing
offline peer-to-peer transactions using digital euros that are completely anonymous at least up to
a limit Of course nobody knows what this limit is and obviously all those anonymous transactions
will be visible the moment you’re back online But the fact is that as more time goes on the
more watered down it becomes At first glance you might think this is because most Europeans
have no interest in adopting the digital euro even according to the surveys conducted
by the ECB Upon closer inspection however you realize that its biggest opponents are not
libertarian-minded Europeans but the big banks And this is where things get interesting As some
of you know the ECB is explicitly looking to put a limit on digital euro holdings And I’ll repeat
that the exact limit is up in the air Contrary to popular reports this is not to restrict Europeans
from spending but to prevent the banking system from collapsing And that’s because if there’s
a crisis of some kind it’s believed that most Europeans would swap a lot of their regular euros
for the digital version And that’s simply because they would be safer to hold than regular euros
since the former are owned and operated by the ECB and the latter by commercial banks The practical
effect of this would be central bank reserves being drained potentially triggering a banking
crisis that causes the banking system to collapse Kind of like what we saw in the US in early 2023
Again it seems that the ECB wouldn’t mind the big banks going under but even they understand
that they need the big banks to handle all the onboarding offboarding and help for digital
euro users In any case this is not only why there’s going to be a limit on holdings but also
a waterfall function wherein any digital euros you receive above the limit will be automatically
converted to regular euros in your bank account to preserve bank stability And what’s fascinating
is that the ECB has considered applying the waterfall function to all corporate digital euro
inflows meaning their holding limit would be zero On that note the ECB wants to make digital euro
transfers free for users but still have merchants pay fees when receiving a transaction the same way
they do now with card payments The catch is that the fee will be lower and there will be a limit
to ensure merchants don’t get squeezed In theory this will make the digital euro a preferred
payment method among merchants in Europe as it will be a cheaper alternative to existing card
payments provided by banks and payment processors In reality however merchants may not adopt it
even if it becomes a legal tender A member of the ECB explained in a Q&A last year that this
is because of Europe’s legal tender laws which effectively make it legal for merchants to reject
certain forms of payments even if they’re a legal tender such as cash Given that digital euros
are technically digital cash there’s nothing stopping merchants from rejecting these payments
too At least according to existing laws And this ultimately depends on how lucrative it will be
for merchants to accept the digital euro if the fees are substantially lower than existing card
payments Many merchants would probably accept it as a payment method Even so that doesn’t mean that
consumers would start paying in digital euros As that same ECB member explained it’s not possible
to force someone to do something even if it’s mandatory And this is something we’ve underscored
in many of our videos about dystopian technologies like CBDC’s and digital IDs Sure you can force
people to create a CBDC wallet or create a digital ID but you can’t force them to use these products
in their day-to-day activities The only way to do this is to incentivize them to use the digital
euros But as we just learned it’s dangerous to provide too much of an incentive because if
too many people start holding digital euros it threatens the stability of the banking system
And that’s why the ECB has repeatedly stated that digital euros would not provide remuneration
meaning that you won’t be able to earn any interest rates on your holdings With merchants
and consumers both having very little incentive to hold or use digital euros it’s hard to see how
they would ever gain ground as a payment method within Europe Even that ECB member admitted that
the dominance of public money will be lower in 20 years time even if a digital euro is launched
And this is something that we’ve highlighted in our previous videos about CBDC’s and that’s
that they failed to address the fundamental reason why people are switching to private forms
of money Most publicly issued money sucks because the government which backs these currencies
have taken on too much debt and the central banks which manage these currencies have done a
bad job of doing so And this brings me to those two big questions When will the digital euro
launch and why the alternative could be much worse To recap it will not be launching in October
2025 That’s just when the ECB expects to complete its preparation phase After that’s done EU
politicians will have to vote on its approval And that reportedly takes at least 2 to 3 years This
means that the digital euro may not be launched until late 2027 or late 2028 And that assumes
that EU politicians vote to approve its launch It’s not currently clear how many EU politicians
are in favor And that’s mostly because the design of the digital euro hasn’t been finalized yet
Fortunately or unfortunately the final version will likely be so watered down that it won’t be
a threat to anyone even if approved And this begs the question of what the alternative could be and
why it could come sooner believe it or not But the answer could be stable coins specifically Euro
stable coins Right now stable coins are backed by government debt In the case of Euro stable coins
they’re backed by European government debt In the future however it’s possible that stable coins
will be backed by commercial bank deposits or even central bank reserves As a fun fact the latter is
referred to as hybrid CBDC’s and it’s something that’s been discussed by the World Economic
Forum in reports we’ve previously summarized on this channel From our perspective hybrid CBDC
systems could come much sooner than actual CBDC’s And that’s because the government debt that backs
stable coins is becoming increasingly volatile because of the relentless spending by governments
around the world If this trend continues the chances of a stable coin DPEG will rise as the
collateral backing the stable coins will be harder to liquidate in size to honor redemptions This
risk is acute in the EU where many government bond markets are illquid And this foreshadows a
scenario where a euro stable coin depects because the issuer cannot liquidate the European bonds
back in the euro stable coins at a price that’s high enough to honor the stable coin redemptions
If this were to happen then it would likely result in a change in stable coin regulations that
mandate them to be backed by commercial or central bank reserves creating a hybrid CBDC To
be clear it doesn’t look like this will happen anytime soon but it could happen much sooner
than a regular CBDC launch In case it wasn’t clear enough a hybrid CBDC would be no different
from a regular CBDC to all intents and purposes It would still be possible to set limits on spending
limits on holdings and all other qualities that make CBDC seriously dystopian In fact the same
is true for most cryptostable coins right now What this means is that if stable coins win
against CBDC’s we could practically end up in the exact same dystopian financial system just
with different entities pulling the strings In fact you could argue that a stable coinbased
system would be worse because there would be no way to change it unless you’re an executive at
the stable coin issuer and even then you probably answer to your largest shareholders Not only that
but it’s quite possible that we could actually end up with an actual monopoly of stable coin issuers
Just one or two companies issuing stable coins for all countries globally And this would look eerily
similar to a single global CBDC system that many people in crypto are opposed to and claim to
be fighting against To be blunt a global system consisting of multiple CBDC’s would probably be
less dystopian than a global stable coin system consisting of one or two issuers Consider that
in a multiCBDC system you could still move to another country if you don’t like the policies of
the central bank That probably won’t be possible if we end up in a global stable coin system
consisting of one or two issuers Food for thought And while you’re thinking about it you can check
out our video about how stable coins could solve the US government’s debt problem right over here
And if you’re not subscribed to the channel yet you can do that right over here That’s me for
now Thank you very much for watching Nick out
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