Insight & Analysis

How would you programme the euro?

Published: Jan 2022

A recent report from the Frankfurt School Blockchain Center outlines how a programmable euro could be used by businesses and gives a number of innovative use cases. With these case studies providing a sneak peek of the future, how could you use a digital programmable currency?

Digital euro concept

Business use cases are often neglected in discussions of digital currencies, and a recent report overcomes that by focusing on the innovative uses for industry. In a recent report entitled ‘The Programmable Euro: Review and Outlook’, the Frankfurt School Blockchain Center spells out just some of the ways that businesses could use a programmable euro.

So, what is a programmable euro, exactly? The programmable euro could be issued by private institutions such as banks or e-money institutions, or it could be stablecoins issued by companies, and it would be based on distributed ledger technology (DLT). And programmable payments are made once certain conditions have been met. A simple example of this would be a standing order, which is automatically made on a certain date, or an automated interest payment. With DLT and smart contracts, however, the possibilities are a lot more sophisticated.

And these possibilities could soon be a reality. A European Central Bank-issued digital euro could take a number of years and the authors of the report estimate that it would be available by 2026 at the earliest. Meanwhile, a private digital programmable euro could be used as early as 2022 or 2023.

The FSBC study, which was undertaken for the Finanzplatz Munchen Initiative (fmpi), focuses on the opportunities for a programmable euro on the German real economy and financial sector. The use cases could help liquidity management and create new business opportunities, the report notes.

A programmable euro could facilitate a pay-per-use model, for example. This overcomes the crippling fixed costs that companies face when purchasing equipment and moves them from the usual leasing model to only paying for each use. For the manufacturers of such equipment, they get continual, albeit variable, income stream. And because the upfront costs are not so prohibitive, it potentially opens up new customer segments for them – companies that previously couldn’t afford the equipment might find it more palatable to pay for each time they use it. The report gives the example automaker Daimler using this pay-per-use leasing for its trucks.

This pay-per-use could be combined with other technologies such as tokenisation, internet of things, DLT and artificial intelligence. The study gives the example of intelligent street lights that have their own unique identifier, which means they can make their own payments. For example, a street light could make its own automated payments for the amount of electricity it uses. And if vehicles are charged for the benefit of having a well-lit street, a payment could automatically be triggered every time a self-driving car goes by. This street light, as an autonomous ‘profit centre’, could then be offered to investors who take a share of its earnings.

Another use case is making production capacity more flexible. Building on the idea of companies renting out unused capacity – such as Netflix running its services on Amazon’s servers – a DLT and internet of things marketplace could provide real-time prices and detect when extra capacity is, or is not, available. With a programmable euro, payments could be integrated into this on-demand marketplace for unused capacity.

The programmable euro could be used for electromobility, specifically in the energy sector, where smart contracts are used for buying electricity. For example, smart contracts could be set up so that electric vehicles charge according to pre-set conditions, such as the price per unit. Or it could be set so that a car only charges – and is billed – when electricity prices are lower.

These are just some of the examples of the potential of the programmable euro, with the technology providing the building blocks for the future. With these use cases in mind, what would you do with a programmable euro?

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