Digitalisation has heralded the next stage in the evolution of money. In addition to the familiar forms of money such as cash or bank money, a new form is now emerging: digital money. An ecosystem of different (regulated) forms of money will emerge, for which the technical and regulatory foundations are now being created. This development opens up new opportunities for banks, regulated institutions and fintechs, but it also brings with it numerous challenges that need to be identified, analysed and addressed.
The digital euro
The European Central Bank (ECB) is working with the national central banks of the eurozone to examine the possible issue of a digital euro. This digital European currency would be an electronic equivalent to cash. The ECB's project has been in the preparatory phase since November 2023, with the aim of laying the foundations for the digital euro. This includes finalising the rules and regulations for the new form of money and selecting providers that could develop a digital euro platform and infrastructure. Tests and experiments will also be carried out to develop a digital euro that meets both the requirements of the Eurosystem - i.e. the ECB and the national central banks of the countries that have adopted the euro as their currency - and the needs of users.
At the same time, the European Commission initiated the legislative process in June 2023 and published the proposal for a Regulation of the European Parliament and of the Council on the introduction of the digital euro. This will lay the technical and regulatory foundations for the new form of money, which - depending on its design - could have a massive impact on the business of financial market players.
The stablecoin and the Markets in Crypto Assets Regulation (MiCAR)
Stablecoins are crypto assets that are linked to assets such as gold, official currencies or multiple assets. The use of stablecoins is regulated by the Markets in Crypto-assets Regulation (MiCAR). MICAR also covers various tokens based on a blockchain, i.e. assets - other than tokenised securities - that can be traded on a blockchain-based market. The MiCAR also regulates the issuers themselves as well as crypto asset service providers (CASP), which are intended to ensure the trading of tokens for euros or custody, for example. MiCAR thus creates a secure legal framework for all types of transactions with crypto assets for almost 450 million EU citizens.