Spain Wants A New Digital Euro

Central banks across the world have been progressing towards creating central bank digital currencies (CBDCs). Both the European Central Bank (ECB) and the Bank of Japan (BoJ) have expressed their interest in CBDCs.

However, Europe still trails behind countries like China and Sweden in CBDC development. But Spain would try to accelerate CBDC development, as the Spanish Socialist Party (PSOE) proposed the creation of a research group to examine how a digital euro might work in the nation. The party introduced the Non-Law Proposition as a response to the decreased use of physical cash as a means of payment.

The Spanish government expressed that CBDCs would become the purely digital versions of existing currencies like the EUR and USD. This differentiates other stablecoin projects like Tether (USDT), as government-owned digital currencies are, by definition, a legal tender, as opposed to other stablecoins, which are backed by a given fiat currency.

CBDCs come with great advantages for governments around the globe, as the new form of legal tender can be used to introduce various economic tools like universal basic income, or even collect taxes in real-time.

CBDCs can be also used for financial injections directly to citizen wallets, or limit the CBDC usage to only food, clothing, and housing.

“In the event that a monetary expansion is necessary, it allows a more direct mechanism by injecting liquidity directly into current accounts and thus transferring it immediately and without intermediaries to economic activity,” a PSOE representative noted.

However, since CBDCs – at least for the European Economic Area – are still ideas, all thoughts of programmable money talked about often in the digital currency space remain speculations.

Meanwhile, many anonymity-oriented experts expressed concerns that programmable digital currencies could give governments the type of power that makes privacy and liberty advocates uncomfortable.

Some crypto enthusiasts even questioned whether governments would be able to put conditions on citizens in exchange for payments. In addition, governments might be able to track, trace, and direct the economic behavior of large portions of the population.

It turns out Spain's Non-Law Proposal is a subtle hint to the crypto market, as the Spanish Socialist Party noted that the rapid advancement in the crypto realm managed to create “purely private and more insecure money.” The proposal aims to “restore money as a public good, more stable and under democratic control.”

However, Spain’s hit on cryptocurrencies comes amid nations like El Salvador embracing Bitcoin as a legal tender, but larger countries and unions might not want their funds to rely on anonymity and decentralization. Bitcoin’s dominance also suggests the largest crypto to date has to comply with current laws and regulations, as with Satoshi Nakamoto’s original vision for Bitcoin.

Nevertheless, in order for CBDCs to work, they have to be interoperable. One solution would be to deploy a purposely built blockchain, which would ensure transparency and law compliance from the start.