The position of the German Banking Association recently emerged about the creation of a programmable digital currency that helps develop a digital financial system.

Where this association considers blockchain technologies and encrypted digital currencies as the basis on which the “digital euro” currency is built, and this currency will allow banks to perform many functions, the most important of which are:

• Use smart contracts to handle financial transactions faster and without having to outsource.
• Putting cryptocurrencies into their ecosystem, which brings them valuable benefits.
• Protecting users’ personal data with the help of blockchain technology, and providing a more secure system compared to payments associated with paper money.

Read:Mike Novogratz predicts a big future for NFT tokens

Despite the benefits mentioned above, financial analysts are not enthusiastic about the idea of ​​a “digital euro”, as they believe that this digital currency would lead to increased risks and financial problems, including:

Liquidity problem:

Liquidity is one of the problems facing blockchain-based currencies because their trading volume is less compared to traditional “digital cash.”

However, these analysts did not take into account that cryptocurrencies already have successful stablecoins that lack liquidity issues such as Tether (USDT).

Therefore, it can be said with confidence that cryptocurrencies backed by national banks will not face any problems at the level of liquidity.

Payment problem:

There is a key difference between a stable cryptocurrency and a digital currency.

If someone owns 100 digital euros, he or she owns 100 paper euros.

Whereas, if he owns 100 stable cryptocurrencies, he actually owns a cryptocurrency equivalent to 100 euros.

Which means in this case there is just a non-binding promise to stabilize the value of currency reserves.

Legal problem:

Cryptocurrencies suffer from an even bigger obstacle to their development, which is the issue of getting validation.

Read:Binance gets regulatory approval to operate in Kazakhstan…Details here

We’ve seen many cases where crypto projects fail to get authentication, including the Telegram project and the Facebook project.

Accordingly, European legislators should establish a legal basis for facilitating payment solutions in Europe, as well as create a new framework that would define legal certainty for cooperation between European market participants.

Finally, the creation of a blockchain-based currency backed by European banks seems like an ideal case for mass adoption of cryptocurrencies.

Read also:

Beginner’s guide: What are cryptocurrencies? And how can I make money from cryptocurrency?

7 Most Common Misinformation About Bitcoin (BTC)