A European lawmaker, Sarah Knafo, has suggested scrapping plans for a central bank digital currency (CBDC) in favor of establishing an EU bitcoin reserve. Speaking before parliament, she argued that a digital euro would not effectively address inflation and the economic decisions made by regional governments.
Protecting Citizens from Inflation and Economic Missteps
Knafo contended that a digital euro would fail to safeguard EU citizens against rising prices and poor fiscal choices. She also highlighted ongoing privacy and security concerns regarding the proposed CBDC, which have persisted since the European Central Bank (ECB) began considering it four years ago.
A Paradigm Shift Following the U.S. Elections
According to Joel Hugentobler, a Cryptocurrency Analyst at Javelin Strategy & Research, Knafo’s stance reflects a broader shift in sentiment following recent political developments in the United States. Hugentobler stated that converting CBDC development efforts into a bitcoin reserve could be beneficial due to historical returns.
From an economic perspective, bitcoin’s annualized returns are around 50% to 60%, and this is even more compelling given the substantial declines during bear markets,” he noted. This makes it a logical choice for central banks looking to diversify their reserves. Additionally, the increasing concentration of large holders could pose future risks, but in the short term, it’s encouraging that lawmakers recognize bitcoin as a viable option.”
Privacy and Security Concerns
The ECB has emphasized that its digital euro would be entirely private and secure. The CBDC would employ pseudonymization to mask users’ identities, ensuring no identifiable data could be accessed by the ECB or other authorities.
However, Knafo also pointed out potential challenges with implementing anti-money laundering and fraud prevention measures under EU legislation, which might compromise user anonymity. Her speech further warned against the totalitarian” aspects of a fully-controlled digital euro system, advocating instead for freedom and decentralization.
Highlighting the Decentralized Nature of Bitcoin
Against these concerns over CBDCs, Knafo praised bitcoin’s decentralized nature. She noted that regulatory efforts in the EU have often been restrictive and focused on taxation rather than fostering innovation. The upcoming Markets in Crypto Assets (MiCA) framework is expected to regulate digital assets but does not address CBDCs.
The EU aims to finalize plans for the digital euro by the fall of next year, despite these mixed views from lawmakers.
