La Croix: Is the creation of a digital euro the prelude to a cashless society?
David Bounie: Yes it is certain. What we don’t know is how long it will take to get there. We can already see that the movement is accelerating with the pandemic, as more and more people are reluctant to use coins and banknotes. The use of the card extends, even to settle small sums, thanks to contactless. Central bank digital currency should find its place. We can predict that it will be by 2030.
→ INVESTIGATION. The digital euro, an economic and geopolitical project
How will it be an important innovation?
DB: The real innovation came from private cryptocurrencies. They are built on a very new philosophy, with the ambition to be independent of the banking system and to allow a certain anonymity. This is what their designers sought. Then came a second generation of cryptocurrencies, the “stablecoins”.
These are backed by a major existing currency, such as the euro or the dollar, so that their course varies less. But they are still very innovative. All these cryptocurrencies are indeed based on distributed registers, that is to say that the validation of transactions is done in a decentralized way, thanks to blockchain technology. It is therefore technology that creates trust. It ensures that transactions are relatively anonymous, tamper-proof and verifiable. With private digital currencies, banks are not the trusted third party.
Does a central bank digital currency keep this innovative character?
DB: No, not necessarily. The Chinese central bank currency, for example, works without a distributed ledger and without having a blockchain behind it. It is a classic payment system. A central bank digital currency of this kind is less innovative. But it is likely that central bank digital currencies will leverage blockchain-like distributed ledger technology in the future.
We see today that goods having a purely digital existence reach insane prices. How to explain this phenomenon ?
DB: This is indeed the rise of what are called NFTs, i.e. non-fungible tokens (NFT, for “non-fungible tokens”), which give ownership of a digital asset. People have understood that a unique digital object can have a high value, just like a painting by Monet or Van Gogh. The value of a unique digital object depends on the law of supply and demand. If there are a large number of people interested in acquiring a unique digital good, its price can rise very high.
→ ANALYSIS. The digital euro, an innovation that worries commercial banks
For example, the very first tweet by Jack Dorsey, the founder of Twitter, sold for over three million dollars. Anyone today can create an NFT and sell it on a platform, and its rarity will decide its price. What this enthusiasm for digital goods shows is that today, a large number of people are ready to give them the same reality as physical goods.