IBM consultants offer valuable recommendations to optimize the proposed digital euro legislation, aiming to ensure its success in the competitive payments landscape of the Eurozone. Their insights focus on intermediaries, privacy, technology, and a cautious approach.


As the concept of a digital euro gains momentum, IBM Consulting has contributed its expertise by outlining key factors that could contribute to the success of this digital currency initiative. In a recent blog post, five members of IBM Consulting offered insights to help the European Commission (EC) and the European Central Bank (ECB) navigate the complexities of launching a digital euro in the competitive and diverse payments ecosystem of the Eurozone.


IBM's recommendations aim to facilitate the digital euro's integration and adoption by addressing critical aspects of its design and implementation.


The first point suggested by IBM echoes an aspect already present in the EC's legislative proposal: "Build on existing rails." This approach encourages leveraging the existing infrastructure and payment systems to ease the transition to a digital euro. By utilizing familiar systems, the initial adoption of the digital currency is likely to be smoother. Simplicity is highlighted as a driving factor in the early stages of adoption.


The role of intermediaries is recognized as crucial for the successful acceptance of the digital euro. IBM suggests that the digital currency's design should cater to the needs of intermediaries, envisioning a multi-level ecosystem that supports various players between the end user and the ECB's digital euro components. This approach fosters inclusivity and ensures that a diverse range of intermediaries can participate effectively.


To enhance interoperability and competition, IBM emphasizes the importance of standardizing Application Programming Interfaces (APIs). Standardized APIs simplify integration between different systems and encourage healthy competition among stakeholders in the payments landscape.


Privacy protection is another focal point of IBM's recommendations. The EC's proposal includes strong offline privacy safeguards, and IBM suggests extending these measures to online activities to ensure end-to-end transaction privacy. Aligning privacy rules with existing regulations, including reporting thresholds, is emphasized to maintain consistency and prevent fragmentation of privacy standards.


While distributed ledger technology (DLT) is not deemed essential for a digital currency, IBM acknowledges the benefits of blockchain technology. The authors suggest that blockchain technology offers significant advantages and that its energy consumption need not be higher than that of non-blockchain systems. This insight reinforces the potential for blockchain to enhance the efficiency and transparency of the digital euro's operations.


IBM's final piece of advice centers on a cautious yet progressive approach to implementation. They recommend starting with a minimally viable product (MVP) to expedite time to market. Additionally, creating a sandbox environment can help address the inherent complexities of the digital euro's operational landscape, allowing for thorough testing and refinement before full-scale deployment.


As the journey toward a digital economy unfolds, the insights offered by IBM Consulting underscore the importance of collaboration, simplicity, inclusivity, and technological efficiency. By heeding these recommendations, the European Commission and the European Central Bank can navigate the challenges of the dynamic payments landscape and lay the groundwork for a successful and widely adopted digital euro.


(BRAYDEN LINDREA, CoinTelegraph, 2023)