The development of digital Euro is led by the European Central Bank (ECB). The first announcements were made in 2020, and in July 2021, the European Central Bank gave a “green light” to the digital Euro project. Since then ECB has contracted companies to develop the front end of the solution and engaged itself in a 2-year study on this topic after which it will decide whether to proceed with EU-wide CBDC or not.

At the same time, within the past month, we observed how the digitalization of Euro is independently pushed by private companies, backed by their national money regulatory authorities.

On 18 January, the Bank of Spain (Banco de Espana, BDE) approved a pilot project by the private company Monei to create a digital currency EURM.

On 2 February, Finnish fintech company Membrane Finance launched EUROe, what they called "the first ever EU-regulated, full-reserve stablecoin and payment network".

Spanish EURM by Monei

EURM project is developed under the regulatory provisions of BDE's financial sandbox, by Spanish fintech company Monei. The financial sandbox is a controlled testing environment allowing innovative fintech-based projects to test with real users, while under the supervision and control of the Spanish authority. The company submitted the application for this project back in 2021.

Monei is a Spanish payment system provider and integrator headquartered in Málaga. The company is licensed by the BDE and is a member of several working groups of the European Payment Council and the European Central Bank. In 2022 Monei partnered with MasterCard to make their “Click to Pay”, a technology that streamlines online payments by cards, available in Spain.

Álex Saiz Verdaguer, CEO and founder of Monei, has highlighted the potential of this project:

"...the future of payments is digital. This is our opportunity to show the rest of Europe and the world that we are at the forefront. EURM is the ultimate pan-European solution that will allow citizens and businesses across the continent to send and receive money instantly".

EURM pilot will be run on the Ethereum network. Initially, the project will be privately tested with 500 users in Spain for 6 to 12 months and, if successful, will be made public not only in Spain but also in the EU.

Finnish EUROe by Membrane Finance

The stablecoin EUROe, developed by Finnish company Membrane Finance, is also designed to convert fiat Euro into a digital currency. According to the company website, their mission is "to develop an ecosystem of secure money infrastructure, user-friendly applications and stablecoin related services to drive adoption of blockchain based financial services that help foster financial innovation and inclusion".

Membrane Finance is a subsidiary of Finland based Equilibrium Group, a company engaged in research and development of tools and products for DLT ecosystems such as IPFS, XRP ledger, StarkNet and Zcash.

Currently launching on Ethereum, the company aims to integrate EUROe with other blockchain platforms to enhance its interoperability and expand its usage as a payment option.

"We have a strong protectionist perspective in building EUROe. An EU version must be introduced to the market to compete globally with other currencies. Keeping euro reserves in the [EEA] region and preventing reserve cumulation outside the EU is mandatory to keep up with the competition, and EUROe will certainly play a role in this," Membrane Finance CEO Juha Viitala said, adding that regulation was crucial in legitimizing blockchain innovations and expanding their reach to wider markets.

With regulatory approval obtained from the Finnish Financial Supervisory Authority (FIN-FSA), a fully recognized EU financial institution, EUROe founders position it to bypass potential issues related to the European Union's plans to establish a common regulatory framework for crypto-assets.

Initially, the company was applying to be recognized for a virtual currency provider license. Following months of negotiations, FIN-FSA granted the company an electronic money institution license.

"We've been working towards this very goal for the last 18 months. Getting an EU-level license is massive news for both us and the wider European cryptocurrency market and community," Membrane Finance CEO Juha Viitala said in a blog post.

During an interview with the Finnish podcast Lohkoketju in February, Viitala suggested that the decision to register the company as an electronic money institution was a strategic move to ensure compliance with the forthcoming Markets in Crypto Assets (MiCA) regulation in the European Union. According to the proposed legislation, the issuers of asset-referenced tokens will need to be authorized as credit institutions or electronic money institutions under MiCA.

CBDC or Stablecoins?

From the viewpoint of the users, it does not matter whether the digital currency in their mobile wallets is a liability of the Central Bank or that of an issuing private bank. It is the convenience, privacy, and fees that matter. On the other side, a well-regulated and controlled national stablecoin might cover the objectives currently sought by CBDC researchers. Or, maybe, stablecoins and CDBCs will complement each other. We continue our observation.

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