Public debate in Europe around CBDC got reactivated over the past weeks. Finance chiefs from the euro zone stated that more regime is needed to control digital currencies and keep private initiatives such as Facbook’s Libra from treating financial stability.
The European Commission is expected to propose legislation on this subject in the near future and the ECB (European Central Bank) will soon debate whether or not the region needs to create a digital currency of its own.
This triggered me to take a deeper look at recent developments of Monerium, expanding its platform to Algorand’s blockchain. In January 2020, we learned that Monerium and Algorand entered a partnership to issue e-money on the Algorand protocol.
Initially Monerium have chosen Ethereum as the go-to platform, but recently they have decided to shift (or rather expand) to Algorand, so lets digest this topic in more details:
What is Monerium?
How are they different from Stablecoins or Libra?
Why do they need Algorand?
Role of ECB in this picture..
Algorand is smart-contract platform, ideal for DeFi use-cases, but is also focused to attract CBDC use cases to the platform, so the marriage of Monerium and Algorand in this regard, also taking into account acceleration of CBDC talks in Europe, is really fascinating topic.
Ok, but first - Monerium - what are they doing?
What is Monerium?
Monerium is a financial technology company with the focus of making digital currency accessible, programmable and secure, and apparently is the world's first company authorized to issue regulated e-money on blockchains.
Founded in 2015, in Iceland, the Monerium team backgrounds include central banking, finance and cloud services, financial regulation & compliance, and cryptocurrency.
Monerium is the world’s first ECB authorized provider of e-money for blockchains. It currently support emoney across EU, Iceland, Norway, Lichtenstein in USD, EUR, GBP and and Icelanding Korona.
Mission at Monerium is to make money smarter, so that it can be exchanged fast, with minimal friction, and without intermediaries. They've designed the e-money in a way to make it accessible on all major blockchain platforms. That is why they have recently announced that will be offering the euro on the Algorand blockchain in Q1 2021.
Using e-money issued by Monerium, individuals and businesses can store and send programmable digital currency online without going through traditional financial institutions and payment providers. They build a platform to digitize fiat currencies, storing fiat with Custody providers, but giving them the feel and features of digital money, thanks to blockchain like Algorand.
How is Monerium different?
Monerium helps businesses move euros between their bank accounts and their blockchain wallets. With Monerium you can get IBAN for your digital wallet, which will be linked to your digital money on the Algorand blockchain.
create a unique bank account number for the digital wallet.
Send and receive money to and from bank accounts worldwide just as you would at a normal bank.
The IBAN is connected to SEPA instant payment.
So you can send and receive funds within seconds even on holidays.
OK..but Stablecoins have similar features..
Monerium is Regulated. Monerium is an electronic money institution, a European regulated entity that is licensed to operate in the EEA and UK.
Monerium is Redeemable. Monerium’s e-money is 100% backed in high-quality liquid assets and is unconditionally redeemable on demand.
You can play in the sandbox to understand how it works.
Why they need Algorand?
Algorand removes the technical barriers that for years undermined mainstream blockchain adoption: decentralization, scale, and security.
Algorand comprehensive smart contract capabilities enable the creation of DeFi solutions and dApps that can scale to billions of users, millions of daily transactions, with negligible transaction fees.
As far as digital payments are concerned we should be preparing for huge scale of daily transaction volume, and slower and less scalable smart contract platforms like Ethereum would not handle it.
Monerium is targeting to be blockchain agnostic, hence diversification from Ethereum to Algorand (capable handling 1k trx / sec today, expected to grow to 10k trx/sec early 2021) seems to be a great choice.
Thanks to multiple SDKs and quality documentation and tutorials it is easy to start building on Algorand, Developers can find all the resources they need to turn their ideas into full-scale applications on the Algorand Developer Portal.
Monerium is leveraging Algorand because it incorporates key features for many mainstream use-cases, including stateless and stateful smart contracts, scaleable proof-of-stake consensus. With the support of Monerium on Algorand, the Algorand community can leverage the fully programmable and redeemable e-money across the EU, Iceland, Norway and Liechtenstein in US Dollars, Euros, British Pounds, and Icelandic krona for straightforward regulatory compliance
Algorand is already leveraged for financial use cases like:
CBDC for Republic of Marshall Islands, is an experimental Central Bank Digital Currency (SOV) that is issuing it’s digital money on Algorand Blockchain. I have covered this comprehensively in this article (CBDC on Algorand, First One - But More to Come)
Private investing platform Republic is leveraging the Algorand platform to enable its low-cost structure and high throughput volumes to power its profit-sharing token, the Republic Note. Watch this video for details (polish)
Archax (digital securities exchange) is working with Algorand to develop ground-breaking financial products that will trade on its FCA regulated exchange. Powered by Algorand's recent smart contract upgrade, Archax will be able to develop a number of new products including smart stablecoins and liquid alternative investments.
Chainalysis provides a best-in-class transaction monitoring solution for the Algo token so that Algorand users can access details that help them build and realize the decentralization, transaction volume, speed and scalability on the network.
MESE.io is a microequity stock exchange powered by blockchain, aimed at letting users invest very small amounts in selected stocks. MESE.io has build its business on the Algorand blockchain as the negligible transaction fees on Algorand allow MESE to provide microequity token shares that would not be viable on a chain with substantive transaction fees. Please see more details in the video.
Bleumi Pay on Algorand supports payments via e-commerce plugins WooCommerce, Adobe Magento or OpenCart. Businesses can simply download the plugins and start accepting digital currency payments on Algorand’s rails.
Find more use cases here.
European Central Bank’s steps toward CBDC.
“We cannot allow ourselves to lag behind on CBDC”, said Governor of the Bank of France
European Central Bank President Christine Lagarde announced on Nov 01, 2020 an ECB survey of public opinion regarding the issuance of a digital euro, implying the central bank is considering a retail central bank digital currency (CBDC)
European Central Bank (ECB) issued a report to examine the “possible issuance of a digital euro”.
This report examines the issuance of a central bank digital currency (CBDC) – the digital euro – from the perspective of the Eurosystem. Such a digital euro would be a central bank liability offered in digital form for use by citizens and businesses for their retail payments. It would complement the current offering of cash and wholesale central bank deposits. Read more in this report
Also, there is another interesting publication by ECB regarding regulatory and financial stability perspective on global stablecoins issued in May 2020, talking
Financial stability risks
quantify the potential size of global stablecoin arrangements, using the Libra initiative as an example
Facebook’s Libra was definitely a wake-up call mid-2019 for Central Banks that they have a raising ‘competition’ as far as digital currencies are concerned, and they seem to be expediting the work in this regard since then. We see that with BIS (Bank for International Settlement) undertakings, but also with recent announcements from ECB taking place.
CBDC in the Context of Monerium and Algorand
With solutions like Monerium on Algorand, looks that the technical part of the job (re CBDC or digital money) is already done.
What is missing is the clear regulatory framework and acts to deploy and implement it.
With e-money already established as a proven form of digital euro, the only thing that the ECB needs to do, is to give e-money comparable status to physical cash is to grant e-money issuers access to the ECB’s reserves.
Only or that is a big thing?
Well.. several central banks within Europe already granted e-money issuers limited access to of their facilities (Bank of Lithuania, the Bank of England),
As e-money backed by the ECB, the digital euro would pioneer a new standard for digital money independent of bank lending and unshackled from the siloed and proprietary interfaces of the current financial infrastructure. The Eurozone would reduce systemic risk and remove barriers to the adoption of digital money by households.
Monerium and Algorand seem to be providing a ready to go platform, complying with regulatory requirements (licencing - thanks to Monerium) and technical requirements (scalability, speed, costs and traceability - thanks to Algorand).
How this all evolves we shall see in the coming months and years. Because of covid situation, we see the transformation in many areas expediting, including digital payments, digital supply chains, transformation of how we work and communicate, so eMoney seems to be unavoidable need in this context, and I am pretty sure that 2021 and onward we will see first implementations of CBDCs in some countries, what will stimulate even more heated debates in countries which are lagging behind.
Alogrand might be a good answer to address requirements of digital payments, and Monerium might help with regulatory frameworks.