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The latest crypto-currencies are state owned and they are booming...(EN/FR)

----------------------- ENGLISH VERSION ----------------------

(French Version Below)

Since the creation of Bitcoin in 2009, crypto-currencies have gained so much notoriety that Central Banks around the world are launching or have already developed their own crypto-currencies: Central Bank Digital Currencies (called CBDCs). At a time when the US Federal Reserve is urging the American states to develop digital currencies in order to maintain the dominance of the US dollar; could we, one day, consider the possibility of a "crypto-euro zone"?

What are CBDCs and why are we interested in them?

Central Bank Digital Currencies are classic crypto-currencies with one difference, they are subject to regulation by Central Banks. Where the prices of some crypto-currencies fluctuate freely according to supply and demand (read our article dedicated to Bitcoin), the price of a CBDCs would be stabilised by the Central Bank that issues it, so as to mitigate the fluctuations that these crypto-currencies can experience.

CBDCs could be of 2 types: retail or wholesale. Retail CBDCs would be for use by individuals while wholesale CBDCs would be reserved for financial institutions such as banks. Regardless of the type of CBDCs developed, one thing remains certain: all countries in the world are seriously considering this option.

Indeed, Sweden, China, the United States and even the European Union - previously reluctant to the idea of a "crypto-euro" - are launching experiments to study the potential of these CBDCs.

There are many reasons for this interest, the first of which is undoubtedly linked to the explosion of crypto-currency markets. Indeed, between 2017 and 2018, the number of crypto-currency users jumped by +94% and it is now nearly 7% of French people who hold crypto-assets. The consequence of this boom in crypto-currencies was simple, private players such as Facebook with Libra (now Diem) entered this race and it is an entire monetary organisation that was threatened. Mark Zuckerberg then confirmed these fears of a threat to monetary sovereignty and user privacy, saying about Libra (Facebook's crypto-currency project) : "Because we're a successful company that's big enough, we're now able to build unprecedented systems... more sophisticated than what many governments have. The global central banks then realised that crypto-currencies were going to grow with or without them, so they chose to develop them by taking a leading role in order to regulate them. The experiments undertaken by the ECB and the central banks of the euro zone are in this sense a clear and direct response to the initiative led by the Diem association (ex-Libra) unanimously condemned by European politicians.

Another reason explaining why Central Banks are attracted to crypto-currencies is the potential of these tools. Crypto-currencies have many advantages, some of which are based on the blockchain technology that allows, among other things, fully anonymous transactions with a high degree of security and reliability. However, traditional crypto-currencies also have major flaws, the most obvious being their high level of instability. Some crypto-assets have been created to compensate for this lack of stability, the Stablecoins (read our article dedicated to Stablecoins).

CBDCs could also be created on the principle of Stablecoins, which have certain advantages over traditional crypto-assets.

Have the world's central banks already set up their CBDCs?

Although quite shy, CBDC initiatives are flourishing around the world. However, the Bank for International Settlements (BIS), in its third annual study on the subject, reported in January 2021 that more than 86% of central banks were involved in projects involving CBDCs (see below).

China has chosen to ban all stablecoins backed by the Renminbi, thus paving the way for the deployment of its own CBDCs, the Digital Yuan (e-CNY). At the end of 2020, the People's Bank of China proposed an amendment stating that "the Renminbi has both a physical and a digital form". The Chinese government's aim is to make its digital currency available to tourists and international athletes attending the 2022 Winter Olympics in Beijing.

However, unlike countries such as Sweden and the Bahamas, which have developed their own digital currencies, the e-Krona and the digital Sand dollar respectively, some observers believe that Beijing could use its digital currency to compete with the dollar at an international level.

This last fear has prompted the United States to intensify their research on a digital dollar currently being conducted jointly by MIT and the Boston branch of the FED. The Digital Dollar Project and Accenture, announced on 3 May 2021 the launch of 5 pilot programmes on the creation of a American CBDC.

What impact on the daily economic life of citizens?

This proliferation of CBDC projects will lead to a number of changes for the people who will have access to this new form of currency.

The main change is that all transactions carried out via these CBDCs can be monitored by the public authorities. The issue of dematerialisation of currencies thus goes hand in hand with those of respect for confidentiality and privacy, which were only rarely raised with fiduciary currencies and which must therefore be the topic of a debate in order to guarantee them. This possibility of tracing all financial flows thus concentrates the criticisms of the defenders of crypto-assets who see in the CBDCs a desire on the part of the States to take over a part of the economy that has escaped it until now. This remains all the more noticeable when it is a State where the surveillance of citizens is common knowledge.

From a more operational point of view, the CBDCs will make transactions more fluid, safer (because they are guaranteed by the Central Banks, unlike crypto-currencies where some transactions are unsuccessful) and less costly (very high transaction fees compared to traditional currencies) than traditional transactions because of the control of the State over their operation and the minimisation of user fees. Moreover, as the pandemic has greatly accelerated the digitisation of means of payment, the CBDCs will play an even greater role in perpetuating this movement.

Finally, one of the major advantages for users would be the possibility of using their money without necessarily going through a private banking institution, since the digital currency would be available directly from the Central Banks. CBDCs could thus prove to be a real tool for financial inclusion which, once deployed at a large scale and in conjunction with mobile payment tools, could enable populations without bank accounts to receive and exchange money.

----------------------- FRENCH VERSION ----------------------

Depuis la création du Bitcoin en 2009, les cryptomonnaies n’ont cessé de gagner en notoriété, si bien que les Banques Centrales du monde entier lancent ou ont déjà mis au point leurs propres cryptomonnaies: les Monnaies Numériques de Banque Centrale (appelées MNBC). À l’heure où la réserve fédérale américaine enjoint les États américains à développer les devises numériques afin de maintenir la prédominance du dollar américain; pourrions-nous, un jour, envisager la possibilité d’une “zone crypto-euro” ?