Programmable euro

Overview

The programmable euro is an innovative and digital form of the euro that is based on a DLT. It includes the euro as a stablecoin, tokenized commercial bank and e-money, or as a (DLT-based) CBDC. Primary benefits of a programmable euro are related to increased automation due to programmability, higher transaction speed, and lower counterparty risk.

germany-31017_640     See German publications below. 

Money in programmable applications: Cross-sector perspectives from the German economy

Federal Bank of Germany

Digital transformation is giving rise to new business models and is fundamentally changing existing business processes. Many of these processes will be much more automated still in future. Distributed ledger technology, which uses tokens to represent real goods and services and allows these to be traded digitally, makes it possible for flows of services to be programmable, autonomous and automated. This means that existing payment systems are set to be confronted with new challenges. The extent to which the advantages of digital settlement can be exploited is largely dependent on whether the associated cash flows will become equally programmable and can be synchronised with flows of services.

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Programmable Money and Programmable Payments

Medium

“Programmable money” is, without doubt, one of the major buzzwords in the blockchain space in 2020. Even though everyone seems to talk about it, we still lack a clear definition and hence common understanding of this term. In this article, we present a taxonomy of programmable money. In particular, we argue that “programmable money” has to be differentiated from “programmable payments”. To make this distinction as clear as possible, we develop a framework in which we decompose the payments value chain into three pillars: the contract execution system, the digital payment infrastructure, and the monetary unit. 

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The Digital Euro and the Role of DLT for Central Bank Digital Currencies

Medium

Digitization has reached the monetary system. The advent of crypto assets, such as Bitcoin and Ether, revealed numerous advantages these digital assets based on distributed ledger technologies (DLTs) can bring: Using DLT can enhance the security of sensitive financial transaction data, increase
transaction speed through faster processing and settlement and automate numerous business processes through smart contracts. These advantages ought to be realized in the conventional monetary system as well — not only in the “crypto industry”. DLT can be used both to digitally represent bank deposits and to tokenize central bank money via central bank digital currencies (CBDCs). Current DLT-based CBDC projects and prototypes among others by the Chinese and Swedish central banks, but also initiatives by the European Central Bank (ECB), show that DLT will be an essential pillar ofthe digitization of the monetary system in particular and the financial system in general in the future.

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How Will Blockchain Technology Transform the Current Monetary System?

Medium

Why should the payment systems we use and the money that is transferred via these systems itself make use of distributed ledger technology (DLT), namely Blockchain technology, the underlying technology of cryptocurrencies such as Bitcoin? This article gives a brief explanation of the structure of the current money and payment system and the functioning of blockchain technology with Bitcoin as an example. It further elaborates the advantages of DLT and its difference to the current design of the monetary system. The last chapter summarizes the different ways of how DLT can be used in our current money and payment system.

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Open Letter: Roadmap Towards a Digital Programmable Euro

Medium

With this letter published on June 15, 2020, we would like to propose a long overdue, high-level roadmap concerning the digital programmable Euro. This initiative is supported by a large and diverse group of experts from across Europe and other countries.

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The Digital, Programmable Euro: Statement by the FinTech Council of the German Federal Ministry of Finance

Medium

On July 23, 2020, the FinTech Council of the German Federal Ministry of Finance (German: FinTechRat des Bundesministerium der Finanzen) published a statement about the digital, programmable Euro. With this article, we provide an unofficial translation of the German version of the paper with the goal to make the content also available to non-German speaking readers. More information can be found on the website of the German Federal Ministry of Finance.

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The Digital Programmable Euro, Libra and CBDC: Implications for European Banks

Working Paper

Existing payment systems get more and more disrupted. As a consequence of the global trend of digitizing payments and generating new business models from the use of blockchain-based digital programmable money, several new payment initiatives have been announced recently. Besides “classical” crypto assets, also stablecoins become increasingly important. The announcement of the Facebook-initiated Libra stablecoin is mainly perceived as a game-changer for the financial sector. Today, also central banks discuss the introduction of their own digital currencies, so-called CBDCs. To date, these payment innovations are not sufficiently discussed and analyzed from the perspective of different sectors and industries, as its implications remain unclear since most initiatives have not yet been introduced. At this point, the literature does not sufficiently discuss the implications of these innovations on the financial sector. This paper sheds light on the perception of these payment initiatives by interviewing more than 50 senior experts. In this study, we analyze the impact of digital programmable Euro initiatives, such as the Libra stablecoin, and CBDCs, on banks. We find that both Libra and a Euro CBDC might heavily affect European banks. Experts fear that large-scale financial disintermediation of the financial sector could take place, and digital bank runs could be triggered. Besides these risks, our findings suggest that banks also have the opportunity to develop new business models stemming from these initiatives. Therefore, Libra and a CBDC Euro should not only be seen as threats but also as opportunities.

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Überblick

Der programmierbare Euro ist eine innovative und digitale Form des Euro, die auf DLT basiert. Er umfasst den Euro als stabile Münze, als tokenisierte Geschäftsbank und E-Geld oder als (DLT-basierte) CBDC. Die Hauptvorteile eines programmierbaren Euro liegen in der stärkeren Automatisierung aufgrund der Programmierbarkeit, der höheren Transaktionsgeschwindigkeit und dem geringeren Gegenparteirisiko.

Geld in programmierbaren Anwendungen: Branchenübergreifende Perspektiven aus der deutschen Wirtschaft

Bundesbank

Die digitale Transformation lässt neue Geschäftsmodelle entstehen und ändert bestehende Geschäftsprozesse rundlegend. Viele Prozesse werden in Zukunft noch viel automatisierter erfolgen. Die Distributed Ledger Technologie, auf der reale Güter  und Dienstleistungen als Token abbildbar sind und digital gehandelt werden können, ermöglicht programmierbare, autonome und automatisierte Leistungsflüsse.
Dadurch werden die gegenwärtigen Zahlungssysteme vor neue Herausforderungen gestellt. Inwieweit die Vorteile der digitalen Abwicklungstechnik realisiert werden können, hängt in hohem Maße davon ab, ob die dazugehörigen Geldflüsse gleichermaßen programmierbar werden und mit den Leistungsflüssen synchronisiert werden können.

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Der digitale, programmierbare (Blockchain-)Euro – Hintergrund, Chancen und Umsetzung

Artikel

Immer mehr bemerkenswerte Initiativen des privaten und des öffentlichen Sektors drängen derzeit auf den Markt, um die Digitalisierung des Geldsystems voranzutreiben. Dazu gehören beispielsweise das von Facebook-initiierte Projekt Diem und das DC/EP-Projekt der Chinesischen Zentralbank (PBoC). Beide Initiativen setzen Europa und die Europäische Zentralbank (EZB) unter Druck. Denn: Beide Zahlungssysteme werden von außerhalb der EU betrieben und gesteuert und könnten bei weit verbreiteter Nutzung die internationale Rolle des Euros schwächen. Auch aufgrund dieser geopolitischen Gründe wird die Einführung eines (Blockchain-basierten) digitalen, programmierbaren Euros, beispielsweise in Form einer digitalen Zentralbankwährung (CBDC), vermehrt gefordert.

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Stel­lung­nah­me: Der di­gi­ta­le, pro­gram­mier­ba­re Eu­ro

Artikel

Der FinTechRat hat sich in einem Positionspapier umfassend mit zukünftigen digitalen und insbesondere programmierbaren Geldformen befasst. Die Programmierbarkeit von Zahlungsflüssen könnte demnach zu einer Erhöhung der Effizienz im Zahlungsverkehr führen und einen maßgeblichen Innovationsschub bei der Digitalisierung der Industrie leisten.

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