What is the purpose of the cryptocurrency that CaixaBank will launch with eight other European banks?

BarcelonaCaixaBank will launch a cryptocurrency next year along with eight other European banks. The new digital currency will fall into the category of stablecoins, which, unlike Bitcoin and Ether, among others, avoid volatility and variability by being linked to stable assets. In this case, in which the Catalan financial institution creates a consortium based in the Netherlands together with ING, Banca Sella, KBC, Danske Bank, DekaBank, UniCredit, SEB and Raiffeisen Bank, the reference currency will be the euro. The plan is expected to be operational next year.

What are cryptocurrencies?

They are a form of digital money. They typically work with technologies such as blockchain (privacy and security through a reliable and hack-proof record of transactions) and decentralized networks. One of the differences with traditional money, such as the euro or the dollar, is that they are not issued or controlled directly by a central bank or government. They allow value to be sent and received over the internet securely, without any mandatory intermediaries.

What is a stablecoin?

The stablecoins Stablecoins or cryptocurrencies are a type of digital (non-physical) asset whose price is linked to another asset through a parity relationship. For example: one stablecoin It's equivalent to one euro, if that's your benchmark. The most popular cases maintain a 1-to-1 relationship with the US dollar, while others are paired with gold or other assets, including cryptocurrencies. Cryptocurrencies that aren't in this category, like Bitcoin, rise and fall very sharply, so they're used for speculation, and just as you can win a lot, you can lose a lot.

How is the exchange rate maintained?

In the project in which CaixaBank participates, to maintain the relationship with the reference physical currency there is the deposit of an equivalent value, i.e. a collateral. Each stablecoin It will be invested in highly liquid equivalent assets. If, within a few minutes of being delivered, the client wants to recover it, the holder must be able to access it immediately. That's why banks will have to look for collateral that can be converted into liquid assets immediately.

What's its use?

Initially, users will generally be reluctant to use this tool because they already have alternative payment methods that work, such as cards or Bizum. Initially, it will be especially useful for businesses, for example, to make more direct international transfers with lower fees, or to send remittances. An example is a country with very high inflation, where the national currency loses a lot of value. For example, these cryptocurrencies can be sent and their value protected by being linked to the euro. It can also be used to encourage those who have bitcoins, ethers, and other volatile cryptocurrencies to choose to transfer them to this more stable type of digital asset. Due to their volatility, bitcoin or similar cryptocurrencies can hardly fulfill one of the characteristics of money, that is, being a store of value. In the future, new uses and functions of these tools will emerge. stablecoinsIn fact, it's a bet on the future, experts explain.

Is it regulated?

Last year, the new European regulation MiCA (Markets in Crypto-Assets) came into force, which regulates the issuance of stablecoinsAs a result, many projects are seeking licenses within the European Union (EU). The project in which CaixaBank participates will be subject to this regulation.

Why is it said that it serves European financial autonomy?

Of the more than 290 billion euros in stablecoins Of the currencies currently circulating around the world, more than 90% are pegged to the dollar. The best-known examples are DAI, USD Coin, and USD Tether. Some projects in Europe are even pegged to the US currency. The emergence of an initiative by nine European banks, including CaixaBank, which is open to more joining, will allow the European currency to increase its weight against the dollar and also enter international digital transactions between companies, which are currently dominated by cryptocurrencies that use the dollar as collateral.

Are there any other experiences in Europe?

They exist, but even these, in some cases, are tied to the dollar. They are generally promoted by private companies, such as Circle (Euro Coin or Euroc), which is pegged to the euro, like Stasis, or even by individual banks, such as France's Société Générale. Furthermore, the European Central Bank (ECB) plans to launch the digital euro, as do other central banks, but this likely won't be until 2028 or 2029. It will be a central bank digital currency, an electronic equivalent to cash that will offer an additional payment option in addition to banknotes and coins. Like other cryptocurrencies, the digital euro will be stored in an electronic wallet created by each customer's bank or a public intermediary, allowing for all everyday electronic payments—in physical stores, online, or with friends—by phone or card, with or without an internet connection.