QQQ - The Digital Euro

2023-05-17 14:33:14 ET

Summary

• The financial world is becoming more and more digital, and this trend will dominate the future of money.
• Central bank digital currencies are being developed all over the world, and it is important for us to learn as much as we can about them and how they function.
• Right now, there are at least 40 governments that are investigating digital currencies and are in various stages of putting them into place.
• Nothing is really seriously wrong with our current system. So, in effect, we are looking for a solution to the "cash"-based system we now have almost solely due to the changing technology.
• The world is becoming digital. Money and finance is becoming digital. Period.

One hears a lot today about the possibility of digital currencies, but, at the same time, little real detail comes out about what is going on in the world of digital currencies.

If one would like to read a current, up-to-date picture of where the world of digital currencies is going, I suggest the article by Martin Arnold and Sam Fleming that appears in the Financial Times and is titled, in the newspaper addition, "The Digital Euro: A Solution Seeking A Problem."

To me, the essence of the problem is, first, electronic-based finance is going to dominate the world, but, as yet, what that system is going to look like is still unknown.

The article discusses what the European Central Bank is planning to do and, also, what others are planning to do.

Christine Lagarde, president of the European Central Bank, has supported the digital initiative for the ECB since 2019, when she joined the bank.

In October 2023, the ECB is expected to announce how the European system will be put into place.

In 2026 or 2027, final decisions will be made.

But, more specifics will begin to spread into the world this summer.

As far as the rest of the world is concerned, there are several central bank digital currencies (CBDCs) already in existence. The countries of Nigeria, Jamaica, and the Bahamas have CBDCs, while there are pilots in 34 jurisdictions covering wholesale and retail CBDCs.

The Essence Of The Movement

This movement just highlights the basic truth we are dealing with.

The world of digital currencies is becoming global, and we must accept the fact that digital is going to dominate the financial world. After all, money and finance are nothing more than information, ultimately zeros and ones, and history has shown information grows and spreads everywhere.

So, we see digital currencies are spreading.

Digital finance will be everywhere.

The major question is what will the ultimate digitally-based financial world look like.

And, this is where the authors take us.

The importance of digital currencies has only grown as the threat of cryptocurrencies "has faded," as "the value of bitcoin and other forms of money has declined."

But, what we are seeing is a global movement toward the creation and implementation of "the digital" around the world.

And, this is what everyone is now facing.

The world is going to become digital, driven by advances in information technology.

Everyone, therefore, needs to set their sights on this future digital world and work to build... and to integrate... these digital systems into a workable world system.

How Fast?

Well, most analysts believe that the declining use of cash is one of the key motivators of this effort.

Data are used to support this change.

In 2016, the use of cash represented 79 percent of all point-of-sale transactions in the Eurozone.

Last year, the figure was 59 percent.

The percentage of people preferring to pay with cash has declined from 32 percent to 22 percent in the last six years.

The use of credit cards has increased immensely, with PayPal (PYPL), Amazon (AMZN), and Apple (AAPL) entering the field.

The issue is not going to be about whether the financial system becomes digital, the real issue is going to be determining when the financial system can be called "digital."

The Future

And so, this is where we are, on the road to a fully digitized financial system.

Governments must participate in this transition and major organizations must participate in this transition.

It is going to happen! Be prepared!

This is not a situation where one really has time to think about the way things are going or how fast the environment is changing.

The biggest issue over time, I believe, will be the one that is connected to the question of privacy.

As more and more things become digital, more and more information on the people participating in the digital world becomes more accessible to others.

This is the one real thing that causes the developers of digital currencies to step back and think.

It is the one factor connected with digital currencies that causes real concern.

When you consider a country like China, the threat seems very real.

Other countries that are more concerned with the privacy of their citizens are working hard to maintain the privacy of their citizens.

However, this is an issue that will constantly be associated with the ability of institutions and governments to take advantage of the technology in order to see more into their private lives.

This we must be aware of and prepared for.

The final word, however, is that even with the concern over the privacy issue, the world of finance is going to become digital.

You are going to have to move with this trend; the choices, I believe, will be few or none.

Therefore, we must work with the movement and work to obtain the greatest privacy we can.

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