As the fever for digital currencies was growing all over the world, in different sectors. So, Spain has decided to create its own Spanish cryptocurrency; for those who believed that cryptocurrencies were not just a fad or a boom. But, the reality has been constantly disproved, so these last few months have been moving for digital currencies. That has generated a great interest in the financial sector and that now has been added the interest of Spain in creating the cryptocurrency.
So what does the Spanish virtual currency proposed by the government consist of? How can this initiative fit within the European Union? If you want to know more about this proposal, read on!
What are public digital currencies?
Let’s start with the basics, explaining what are the public digital currencies, CBDC, stands for Central Bank Digital Currency. This is characterized by being a cryptocurrency that was issued by a central bank; in the proposal made by the socialist party would have the collaboration of the Bank of Spain. In case it materializes, the Spanish cryptocurrency would be linked to the euro.
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Will it be like a Spanish Bitcoin?
The answer to this question would be no. The differences that may exist between cryptocurrencies such as Bitcoin, Litecoin or Ether and the proposal made by the Spanish government. It is to create a digital public currency, given that the aforementioned cryptocurrencies have their value linked to another currency, while the Spanish cryptocurrency is linked to the euro.
Why are governments interested in creating a digital public currency?
Bitcoin and other digital currencies have generated a lot of noise in economies around the world. Since, many of these are having a strong impact within the financial field and, of course, there are many countries that want to integrate into this new economic model. So, Spain has also decided to propose its Spanish cryptocurrency, to maintain the country’s economy.
Digital, intangible public money is backed by the state because it is deposited in an account at the central bank. They generate benefits for governments that can control this virtual economy, which today is uncontrollable. If people who invest in the world of cryptocurrencies had accounts open in a central bank, this would allow the government to control the amount of digital money that moves.
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Does the Spanish government have the power to promote a digital euro?
How does the Spanish virtual currency proposed by the government fit into the European Union? If the proposal that was presented to Congress becomes a reality. Spain would be the first country in Europe, which would be responsible for promoting the creation of its own public cryptocurrency. But, will it be possible to create the digital euro independently? As commented by the lawyer and professor of commercial law at the University of Madrid Alfredo Muñoz. He clarified that Spain lacks the competence to decide on the issuance of euros, digital or not.
In addition, he pointed out that the European Union has exclusive competence in the monetary policy of the member states, where the currency is the euro, as established in Article 3 of the Treaty on the Functioning of the EU. In addition, as established in the article of the same norm, it establishes that the states must respect the existence of the single currencies. Finally, it indicates that the European Central Bank has the exclusive right to authorise the issue of euro banknotes. Being the banknotes the only ones that are legal tender in the Union.
The European Union’s digital euro
It should be remembered that the digital euro is currently being prepared by the European Commission, with the aim of presenting a proposal in 2021. However, for now the European Commission has not closed the proposal and they are working in parallel in different formats, and it seems that they leave the door open for countries to add possible adaptations at their convenience.
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What is the initiative to create a Spanish cryptocurrency?
The proposition is completely terse, apart from explaining the reasons, the full proposal does not go beyond the paragraph mentioned below:
“The congress that is made up of deputies urges the Spanish government to promote, in collaboration with the Bank of Spain. The creation of study groups to be responsible for evaluating the possible implementation of the Spanish cryptocurrency, or the digital euro as a public digital currency. So that this can offer greater financial stability to both the Spanish economy and the rest of the Eurozone, and that they can recover the character of money as a public good.”
Since, the government has proposed to create a commission to be in charge of studying the creation of a digital euro, as a public digital currency. This would be a virtual currency that would be created in conjunction with the Bank of Spain, and that will create greater stability as described in the proposal. Currently, this proposal is being prepared by the European Commission; however, the Spanish government goes a step further, so it has created the commission group to be responsible for studying the variant that could have on the country’s economy.
One of the main differences of the cryptocurrency such as Bitcoin and the one being proposed by the government, is that it has a value linked to another currency, in this case it would be the euro. This will avoid the high volatility and the impact it can generate in the environment, as described in the proposal. The initiatives that the government has fit perfectly within the previous work that the European Central Bank has.
What do other countries have in place regarding cryptocurrencies?
According to the report of the Basel Bank for International Payments, it has mentioned that more than 80% of the institutions that were consulted are working on projects related to these cryptocurrencies. They are digital currencies that will coexist with the current euro, and even with the respective currencies of each country.
Another proposal is that of the United Kingdom, they propose to launch a new working group between the Treasury and the Bank of England. With the aim of exploring about a possible digital currency of the central bank, if you notice they are almost the same words selected by the PSOE proposal for the commission.
While France has initiated a Project Jura, being an experiment with French and Swiss banks for the creation of a CBDC and study the effects. The implementation of the digital euro, has generated a debate about the creation of new public cryptocurrencies, which are known as CBDC. The currency will be the same, but it was observed through the proposal of Spain, the possibility of how the Spanish cryptocurrency could be has already been thought. For now they are all proposals and studies, but talks on the subject are happening at the highest level within the different European financial institutions.
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Virtual currencies under the management of the European Central Bank
For the year 2020, the Bank for International Settlements made a publication called central bank digital currencies. Where it sets out some of the proposals from different central banks and how digital currencies may come to fit in. Unlike other cryptocurrencies, public digital currencies will be issued centrally by the ECB. Moreover, as stated in the proposal, they will be backed by the state and will be legally protected, as is usually the case with tax data or social security. The proposal points to the Central Bank of Spain, but as it is related to the digital euro, the European Central Bank will have the ultimate responsibility.
The proposal states that the Spanish cryptocurrency, in conversion and value will be the same as if they had handling physical money. In addition, it will be accepted online and offline at all times, the costs will be low at the time of creation and distribution. It will even be resistant to possible cyber-attacks or crashes, and will be operable in different banking systems.
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