What is money tokenization and the digital euro?

 Alfredo Muñoz, Of Counsel in the Blockchain, Digital Assets, and Web3 practice area, participates in the Cinco Días Future Forum Podcast, discussing the tokenization of money and the digital euro.

Our expert first explains: “Tokenization is the representation and incorporation of value in a distributed ledger. This allows us to distribute information among different nodes, and therefore have that complete information, not in a centralized database, but among different members of that network. For example, between the European Central Bank and the different banks of the member countries.”

What is the digital euro? It is a tokenized currency and, according to Muñoz, “tests are already being carried out on the digital euro with the ECB, so it is considered public money, just like our currencies. As it is backed by the ECB, it would never go bankrupt.”

It would be, as is now the case with legal tender, a “monetary asset that can be used to pay,” but our specialist points out several problems: “the first is that it could fail and we could reject it because it is programmable, that is, because we think we can control when and how that money is spent.”

The second problem he points out is privacy: “It is unclear whether the European Central Bank knows where the money is being spent. There is still no clear solution that would eliminate risks in this area.” And finally: “If there is a banking crisis and it is possible to withdraw money from the bank and transfer it to a digital deposit, the crisis would be exacerbated.”