Euro Stable Coin working group
Setting up a digital Euro or Euro token from scratch, provides an opportunity to integrate settlements in programmable accounts on a fundamental level. This could lead to a wave of innovation. The ease of integrating programmable features using a Euro token depends on the design choices yet to be made. A fundamental question arises: do conditioned transactions (based on smart contracts programmability) fit in the design of a public Euro token, a legal tender, which is supposed to be accepted at all times, at all places? In this working group we will explore several conditions for a Euro token in order for it to lead to actual innovation.
Since 2019, the 2Tokens foundation has worked with the community to define token taxonomies for tokenization use cases in different industries. In all these use cases, it became clear that a Digital Euro, Euro token or Euro Stable Coin would greatly help the rate of adoption. The Euro Stable Coin could become an essential factor in the growth of a digital (token) economy. The main innovations surrounding the Euro Stable Coin are primarily linked to the renewable energy market as can been seen in the 2Tokens Energy Token working group, and data (and its employment and applications), also from a payment perspective. The combination of a Stable Coin and digital or self-sovereign identity enables banks and other companies to explore even broader ideas and innovations, enabling further development of for example the Internet-of-Things and Smart cities. A stable, digital currency that is legally accepted and remains its store of value, is essential to realize the actual innovations mentioned briefly. In addition, it is essential that the value of a Euro Stable Coin does not fluctuate.
An important factor for success is the extentto which there is a link between platforms with minimal human interference. Economies in which systems or devices can make their own choices and can use digital payments based on predefined conditions, could accelerate automation on a whole new level.
New Payment Services
The current Dutch payment landscape seems to be strongly developed and to provide many waysfor consumers to pay in ways they prefer. However, there are certain practises which are still not (fully) possible in the current infrastructure.
- Automated payments; fully automated predefined payments without human interference – for example an automatic payment covering delivery costs is being made when a parcel arrives.
- Pay-per-use; real time payment and settlement of services instead of paying in advance or after – e.g., energy market, transport industry.
- Money or accounts only available for specific goals; if money or account can be marked and only available for a specific goal – or type of payment, you could use it to specify and conditionalize accounts and payments meant for donation and foundations
- Nanotransactions: providing costless payment services with transactions worth much less than 1 cent could create many opportunities
- Making payments on DLT platforms (on-chain transactions); currently the absence of a Euro Stable Coin is one of the reasons why fully utilised tokenized innovations are not yet possible, especially in the Euro zone
- Secured communication through payment infrastructure; because of its low costs, speed and security, the network could also be suitable for other applications not related to payments
The sum of these innovations can not only strengthen the economy, but they can also contribute to strengthening financial inclusion and fighting financial crime. Furthermore, these innovations can also be key in realising a sustainable economy.
2Tokens - Concrete Initiatives
Despite the absence of design choices, certain concrete initiatives already exist. Several of these initiatives could possibly be developed even faster with using a broadly accepted Euro Stable Coin as the primary currency. It seems that the common factor of the initiatives is that they are based on making payments with tokenization. Several use cases exist, a first example being a digital notary, which aims to find a way and change the standard in setting up corporations, but in reality it could be any notarial action. Another use case is digitizing and tokenizing the invoice market, making easier verification and standardization of invoices possible, resulting in overall better collaboration and lower costs. The factors that the mentioned cases have in common is that tokenization brings opportunities to realize more standardization, transparency, and lower costs. This also goes for applying the concept of tokenization to the energy market. Consumers are no longer dependent on a centralized party (energy companies) but can instead trade left over energy themselves, peer-to-peer. A win-win situation, for both consumersand climate. Although these tokenization project bring various benefits in themselves, the full benefit would be reached when settlement of payments through a Euro Stable Coin would be included in the transaction.
The applications mentioned previously can have large societal consequences. By only describing the applications of a Euro Stable Coin, banks and central banks could possibly enhance feelings of distrust and suspicion. That is why it is essential to take into account the correct checks and balances, regulatory obligations, democratic control and independent supervision/oversight.
The ECB is working on a possible design but awaiting their digital euro’s design choices means risking two things. First, by waiting for the future design we risk not being able to realize innovations as described in this paper. Secondly, it can also delay the development of the European Economy because of lack of preparation in implementing the digital euro, while other regions in the world are moving fast ahead. This matter should be discussed more widely and not within the financial world only. If ideas on the design and conditions surrounding the framework of a Euro Stable Coin are concrete, more input and useful ideas can be picked up from society. From an innovation perspective there is still a large appetite for a Euro Stable Coin, and the sooner we can engage knowledgeable people, the higher the chance of success.