As European lawmakers continue to discuss the merits of a digital euro, a French magistrate said that plans for the central bank digital currency (CBDC) should be scrapped in favor of an EU bitcoin reserve.
In a speech before the legislature, Sarah Knafo, who joined the European Parliament in June, said that a digital euro would not do enough to protect EU citizens from inflation and the poor economic decisions made by the region’s governments. Knafo also cited the privacy and security concerns that have been consistently raised since the European Central Bank (ECB) began considering a CBDC four years ago.
“There is a paradigm shift happening after the U.S. elections and it looks to be spreading to the EU,” said Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research. “That’s a bold move to just cut the development off cold turkey and focus on building a bitcoin reserve. From a historical perspective, bitcoin’s annualized returns are between 50% and 60%, depending on how you measure it.”
“That includes the large drawdowns during the bear market period, so it’s kind of a no-brainer for central banks and governments to build a reserve,” he said. “At the same time, an increasing number of large holders may lead to other risks down the road due to concentration. For now, it is a positive sign for the industry as a whole that lawmakers are accepting bitcoin as a viable asset.”
Privacy and Security
The EU has been an early adopter of many payment innovations, while the ECB has continued to assert that its digital euro would be an entirely private and secure payment option. The CBDC would use pseudonymization technology to replace real users’ data with fictitious data, ensuring that the ECB or other government agencies would not be able to identify or track users.
However, EU lawmakers have also proposed implementing anti-money laundering and fraud prevention measures, which could potentially jeopardize users’ anonymity.
In her speech, Knafo also noted that “it is time to say no to the totalitarian temptations of the European Central Bank, which wants to impose a digital euro entirely in its hands. We do not want this dystopian world where a European bureaucrat will be able tomorrow to ban certain transactions and even eliminate us from the banking system with a click for a simple comment made on social networks or for an opinion that displeases. It is time to bet on freedom.”
Highlighting the Decentralized
In contrast with her concerns about a CBDC, Knafo praised bitcoin, and noted several efforts around the world that have led to the flagship cryptocurrency’s continued adoption. She highlighted the decentralized nature of bitcoin and said that the regulatory efforts in the EU have been more stifling than supportive, and focused more on taxation and control.
The EU’s Markets in Crypto Assets (MiCA) regulatory framework is just days away from launch, and European lawmakers have been largely praised for creating early standards for digital assets in crypto. However, the MiCA regulations do not address a CBDC. The EU is hoping to finalize its plans for the digital euro by the fall of next year.
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