Slovenia’s Stance on Cryptocurrency and Digital Euro

Today, Slovenia is well-recognized, particularly in Europe as a haven for innovations, technological advancements, and progressive thinking. This environment has enabled Slovenia, one of the smallest European countries to boast a rapidly growing business sector and economy. In fact, it is regarded as the richest Slavic nation, as measured by per capita GDP.

Slovenia is very attractive to investors for various reasons. One of such is its geostrategic position: located at the center of Europe, with excellent quality roads, aviation, rail and maritime infrastructures connecting with the rest of Europe, Slovenia is an ideal point of entry to the several hundred million-strong markets of the Western Balkans. Advanced ICT and physical infrastructure, high-level innovation activities open and foreign-trade oriented policies also make it favourable for business.

In the past half-decade, Slovenia has sought to diversify its economy by adopting initiatives and projects that promote blockchain technology and its first use-case, cryptocurrency. At present, the former Yugoslavian republic’s citizenry utilizes various cryptocurrencies to make payments in over 1,000 stores in the country.

Slovenia also plays host to several associations dedicated to the advancement of blockchain and cryptocurrency technologies and has a very educated and active community.

On the 2nd of October European Central Bank (EBC) published a Digital Euro report which raised the Slovenian business blockchain and fintech community’s interest.

What is a Digital Euro, and what is Slovenia saying about it?

It’s no coincidence that the European Central Bank announced its plans for a digital euro soon after China began its trials on a digital yuan. While there is still a long way to go before such a currency becomes a reality, it shows a distinct intention by the EU to not get left behind in the digital race.

As its name implies, a digital euro will be the digital or electronic version of Europe’s physical money issued by the ECB – like banknotes but in digital form. Similar to banknotes and coins, it will be accessible to all citizens and firms in the Euro area. The introduction of this digital currency is not meant to replace cash, but rather to complement it. Even after a digital euro becomes available, the ECB will ensure that all citizens have access to euro banknotes and coins across the euro area.

On November 26th of last year a discussion on the digital euro was organized by four organizations from the Slovenian Digital Coalition, namely Blockchain Alliance Europe, Blockchain Think Tank Slovenia, Bitcoin Association Slovenia and Slovenian Blockchain Association.

Anja Blaj and Marina Markežič, representatives of Blockchain Think Tank Slovenia, opened the discussion by pointing out that the new currency would have similar functions as cash and competitive features.

Mrs. Markežič highlighted the following as critical propellers for its introduction: the support for the digitalization of the European economy, the declining role of cash, tendency to compete with other institutions and private projects such as Facebook’s Libra, reduction of the ecological footprint and cutting the costs of the existing system. The existence of a digital euro is expected to improve system security, lead to greater unity within the euro area and accelerate transactions whilst reducing its cost. However, Markežič pointed out the need for market neutrality of the digital currency and the problem of end-user confidence.

Simon Anko, Director of the Payment and Settlement System Department of the Bank of Slovenia, explained that currently there are many things that are still unknown about the digital euro such as the digital euro to be issued.

However, what is known is that the goal of the digital euro is not to monopolize the payments market, as the ECB encourages competitiveness and the creation of pan-European private solutions. This means that while the Eurosystem central banks will be in charge of issuing this form of euro; the design of the user experience, mobile applications and front-end infrastructure, and perhaps account management (in terms of customer relations) will most likely be handed over to adequately supervised private legal entities.

Another unknown is the technology that the digital euro is supposed to use. Klemen Zajc, Head of Technological Development at Netis blockchain technologies, which is also a founding member of Blockchain Alliance Europe suggested the use of Blockchain, which has already proven in its practice that it enables the transfer of value from one account to another.

Because the ECB will issue and manage the digital euro, technically, it can’t be classified as a cryptocurrency as it will be of centralized nature. Thankfully, allows the possibility of adjustment for centralized services, such as the digital euro.

Further in the discussion, another representative of the Bank of Slovenia, Mr Anko pointed out that the decision on the next steps regarding the digital euro is expected in mid-2021, and that the Bank of Slovenia is planning a thematic event to which the Slovenian fintech industry will be invited. He also confirmed that the selection of the appropriate technology would be made through pilots on a European level that will also test different technologies, including Blockchain.

All participants in the discussion agreed that dialogue between the ECB and the fintech community is crucial if the introduction of the digital euro is to be a success. Also, with Slovenia’s domestic knowledge and companies that know the tech field well, it can become part of the solution through active cooperation.

As the world moves more in a digital direction, only countries and economies that adapt won’t be left behind. Slovenia is aware of this truism and there are efforts made to prepare the environment receptive to digitization, innovations and new technology – current drivers of its economy.

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Authors: Marko Vidrih, Tanja Bivic Plankar, Anja Blaj
Images credit: Shutterstock