Key highlights:
- European Central Bank president Christine Lagarde says her hunch is that Europe will decide to launch a digital euro
- Lagarde says the project would take several years to complete
- Facebook’s Libra project and China’s digital yuan have accelerated research on central bank digital currencies
Christine Lagarde shares her thoughts on the digital euro
European Central Bank president Christine Lagarde thinks it’s more likely than not that Europe will decide to release a digital euro. When commenting on the digital euro, Lagarde also explained that the ECB isn’t racing to be the first to release a central bank digital currency, but added that she believes the bank will decide about this project shortly.
Lagarde declared that if the digital euro is convenient and suitable for users, the ECB should inspect it. She added that if it is better money for the eurozone, they have to examine it. She also talked about the current difficulties in cross-border payments, and if the digital euro can help regarding this issue, it should be taken seriously.
ECB proclaimed on October 2 that it would try harder to inspect the digital euro, and it will start public testing and negotiations about it. These forms of money are called central bank digital currencies, or CBDCs for short. Many governments are thinking about issuing these types of currencies, and China is the leading government that’s currently experimenting with CBDCs in the real world.
The Digital euro will function as a complement to cash, and will not be a replacement for paper money. The ECB has formed a working group to explore a CBDC, and the group released a detailed report about the topic in October.
Some crucial factors stimulated western countries to take action regarding CBDCs. One of these critical factors was Facebook’s Libra, which accelerated central banks’ CBDC efforts. Another factor was China’s plan to release digital yuan. China is a massive competitor for western countries, and the actions of this country will be reflected.
The ECB’s group on CBDCs was shaped in January 2020, and it is called The Eurosystem High-Level Task Force on CBDCs. This group includes agents from more than 20 European countries.
At Thursday’s event, Legarde explained that if the decision is to go ahead with the launch of the digital euro, the project will take some time to complete. Concerns like money laundering and terrorist financing are of utmost importance, and ECB must implement mechanisms to prevent such activities from being conducted with the digital euro. The ECB will also have to consider issues like the underlying technology and privacy, and that means the project will take time. Legarde estimates this time to be between two to four years.
Powell and Bailey also commented on the issue
U.S. Federal Reserve Chairman Jerome H. Powell spoke at the same event as Lagarde, and he indicated that the US is assessing the pros and cons of central bank digital currencies. He pointed to the dollar’s critical role in today’s world and explained that they want to put this currency in a good position.
Meanwhile, Bank of England governor Andrew brought up stablecoins and added that people expect certainty of value from these coins. Bailey believes some standards are critical in this space, and today’s stablecoins don’t meet those standards. He thinks the CBDCs could be the solution for meeting these standards.
