New Study Highlights the Key Design Choices Facing the European Central Bank and Makes Recommendations for Building an Innovation-Compatible Digital Euro
Berlin, 08. Sept., 2021 – If money is now completely programmable, how should a digital Euro be established? This is the question addressed by Establishing a Digital Euro – How to Ensure Financial Sovereignty in the Digital Realm, a new joint study published by the Internet Economy Foundation, Lakestar, Chainlink and iconomy.
In the wake of the European Central Bank’s announcement in July 2021 that it will begin the process of developing a digital Euro, this new study explains the key design decisions that lie ahead and how each of them can potentially affect the longstanding structures of the monetary and financial systems. It also recommends important guidelines for the ECB to ensure that a digital Euro addresses Europe’s current weakness in global financial services and strengthens Europe’s booming ecosystem of innovation in FinTech, Decentralized Finance (DeFi) and emerging sectors.
The policy recommendations are:
● Create the Digital Euro with a focus on European Financial Sovereignty.
● Use the Digital Euro to reinforce the position of the Euro as an international reserve currency.
● Design the Digital Euro with a wider vision for a more secure future financial system.
● Form should follow function and keep innovation at heart.
● Tailor the Digital Euro to fit the needs and realities of the European startup, scaleup and DeFi ecosystems.
The study examines the existing structures of central banks and how the current system relates to financial service providers as well as consumers. It then depicts a pyramid of the four main design decisions that the ECB will have to make and lays out the key pros and cons of each decision. For instance, would a Digital Euro be an anonymous “token”, like a 1 Euro coin, or would it always be tied to an “account”, like the Euro that is spent with a bank Girocard? Each design decision can potentially send a digital Euro in a different direction and have a large impact on its potential usage in the innovative digital economy.
The partners who have come together to publish the study demonstrate the broad constituencies that are coming together in the new world of digital finance: the IE.F, a think tank dedicated to Europe’s digital future; Lakestar, one of Europe’s leading Venture Capital investment firms and early backers of companies such as payment provider Adyen; Chainlink, the most widely adopted decentralized oracle network that is bridging the on-chain and off-chain worlds to enable hybrid smart contracts and cross-chain applications; and iconomy, a digital consultancy supporting Crypto & DeFi projects as they enter the market and scale. All four partners are united in the belief that the Digital Euro has the potential to strengthen European financial sovereignty and support its ecosystem of FinTech startups and scaleups.
Download the new study here: ie.foundation/en/publications
Prof. Dr. Friedbert Pflüger, Chairman of the Internet Economy Foundation, comments:
“Developments in the digital economy have now made clear that money itself is simply another piece of data. That’s why getting a digital Euro “done right” is so important, and it can help ensure Europe’s place in a global digital economy – one marked by free and fair competition and by the European values that we cherish.”
Nicolas Brand, Partner at Lakestar, says:
“Europe’s digital sovereignty and strategic financial autonomy is threatened more than ever. If Europe moves wisely and boldly with a Digital Euro, it could help unleash a wave of growth and innovation, spurring new products, services and its own global players.”
Sergey Nazarov, Co-Founder of Chainlink, says:
“A Digital Euro CBDC presents a significant opportunity to bridge the traditional financial and monetary systems of today with the growing DeFi economy and the blockchain networks it operates upon. Through the Cross-Chain Interoperability Protocol (CCIP), a Digital Euro can securely interoperate across any public and private blockchain, creating a seamless 'cross-CBDC' environment that expands global access to the Digital Euro and allows institutions to leverage a wider range of financial services for both themselves and their users.”
About the IE.F
The Internet Economy Foundation is an independent think tank based in Berlin that is working to help shape Europe’s digital future. With a focus on the business conditions necessary for successful startups and scaleups, as well as the infrastructure of the Internet economy, the IE.F fights for free and fair competition so that Europe can reach its full digital potential. The IE.F publishes a wide range of studies and policy papers on the Internet economy; you can learn more and download them at www.ie.foundation.
Lakestar is one of Europe's leading venture capital firms investing in technology companies led by exceptional entrepreneurs. The team’s early investments included Skype, Spotify, Facebook and airbnb. Since raising a first fund in 2013, Lakestar manages an aggregated volume of over EUR 1bn across three early stage funds, and more recently a growth fund.
The company has expanded and broadened its portfolio and holds investments in the likes of Opendoor, Oscar, GYG, Glovo, Sennder, Eigen, FiveAI, Revolut and Hometogo to name a few. Lakestar has presence in Berlin, Zurich and London.
Lakestar helps companies to identify new markets and expand into them rapidly, with a focus on the US and Europe. The team advises and supports portfolio companies in business development, recruitment, technology and marketing. The investments range from early stage companies to those in their growth stage.
Visit us on LinkedIn and our website www.lakestar.com
Chainlink is the industry standard oracle network for powering hybrid smart contracts. Chainlink Decentralized Oracle Networks provide developers with the largest collection of high-quality data sources and secure off-chain computations to expand the capabilities of smart contracts on any blockchain. Managed by a global, decentralized community, Chainlink currently secures billions of dollars in value for smart contracts across decentralized finance (DeFi), insurance, gaming, and other major industries.
Chainlink is trusted by hundreds of organizations, from global enterprises to projects at the forefront of the blockchain economy, to deliver definitive truth via secure, reliable oracle networks. To learn more about Chainlink, visit chain.link and subscribe to the Chainlink newsletter. To understand the full vision of the Chainlink Network, read the Chainlink 2.0 whitepaper. Want to discuss an integration? Talk to an expert.
Founded in 2017, iconomy is a Berlin and Munich-based boutique advisory supporting ventures, corporates, communities and investors in the Internet economy. With its hands-on approach, established networks and diverse team, iconomy supports some of the most promising and innovative teams, products and technologies. It helps them find their way into the market, tell their story, make the right decisions and find the right partners in their most important and business-critical moments – from fundraising to strategic business development; from policy support to community building. iconomy’s work spans multiple verticals, with a special passion for Crypto, Fintech, Health Tech, VR & AR, Privacy and AI.
Visit the website at www.iconomy.partners.