The Bank of Spain, through its sandbox, has chosen BBVA, CaixaBank, and the fintech Monei to test a digital euro scenario.
Both banks will act as custodians of the EURM stablecoin, anchored to the euro and developed by Monei. Both banks have been experimenting with cryptocurrency-related services for some time. BBVA added crypto assets to its banking offering in 2021 from its Swiss subsidiary. In October, it reported an agreement with Protein Capital, a company specializing in digital token investments, to hold its bitcoins and ethers in its Swiss subsidiary. CaixaBank launched we.trade blockchain platform in 2020, dedicated to the execution and financing of foreign trade transactions of its corporate clients. In 2021, it selected the fintech Onyze, specializing in digital asset custody and infrastructure, to develop projects.
BBVA, CaixaBank, and the Digital Euro
Monei is a fintech specializing in payment gateways for e-commerce. Among the products it offers is Monei Pay, a hardware-less POS service that can be used on mobile devices such as Android and iOS, facilitating the payment of invoices using some of the services accepted on this gateway. They just added EURM tokens to their payment support, where Caixabank and BBVA are involved.
Monei describes EURM as a stablecoin anchored to the euro, which, for the time being, is only available on its platform in a testing state. BBVA and CaixaBank oversee the issuance of the Monei token, which act as safeguards and custodians of the EURM issuance.
You can only access the Monei EURM under two conditions:
You must be in Spain and have a Spanish mobile phone number.
You are not using the money outside Spanish borders.
A maximum of €10
If you want to join the test, it is necessary to download the Monei app, top up a maximum of 10 euros (issuance limit for each registered citizen during the trial period), and pass the KYC/AML that the application performs using a video recording. You must use a payment method accepted by Monei, such as Bizum. Once you top-up the app, the 10 EURM will appear in the wallet and be used in places where Monei is an accepted payment.
Monei states that the technology behind EURM is "the same as Ethereum and Polygon," making it appear that it is an ERC-20 token. The token is deployed on Monei's private blockchain, as its press release does not indicate any ERC-20 address on those two networks to verify. Given the technology-testing nature of this announcement, it is understandable that everything is taking place in a closed and controlled environment.
Tests such as those conducted by the Bank of Spain in conjunction with BBVA, CaixaBank, and Monei underline the proximity of CBDCs. In the case of EURM, we have the Bank of Spain authorizing a blockchain token, with two commercial banks acting as custodians (BBVA and Caixabank) and Monei as a bridge between CBDCs and users, very similar to the scheme that the European Central Bank has in mind for the digital euro.
Tax agencies can track movements in real-time
However, the digital euro will not be in the hands of companies such as Monei. The ECB will exercise this control, and the central banks of each country will be responsible for doing what the Banco de España is doing with the EURM under measures to promote financial innovation in Spain, among which the creation of a controlled test space known as the Sandbox. That is, authorizing who, when, how, and why each digital euro moves between banks, companies, or people.
Monei's announcement says:
"EURM offers greater transparency, allowing the authorities and the tax authorities to consult these movements in real-time."
The role of banks
In the test authorized by the Bank of Spain, BBVA and CaixaBank are the guarantors and custodians of EURM. But they are also the connection point between users' accounts, their applications, and the ECB's possible rules for those using the digital euro. We are talking about a level of control that would allow things like:
Personalized money for individuals.
The ability to freeze and seize natively.
Applying a limited retention system.
Tax agencies can automatically deduct the collection of taxes and fines from our bank balances.
Money with an expiry date (perhaps the most Orwellian measure).
While authorities can do many of these things with today's digital money, it requires some complexity and the collaboration of third parties. With CBDCs, they can remove these limitations entirely. Moreover, such functions can be added natively and extended through Smart Contracts.
In any case, the ECB plans, at least initially, to complete work on the digital euro by October 2023. After that, the Governing Council will decide whether to move on to the next phase. In that sense, BBVA, CaixaBank, and Monei are doing a dress rehearsal for the route mapped out by the ECB.