ECB Lagarde: Embrace the Digital Euro, Ditch the Cryptos

The European Central Bank (ECB), like the Federal Reserve, Bank of England and other central banks, is working on different projects to develop a central bank digital currency (CBDC).

While most central banks have yet to decide whether issuing a retail CBDC is a desirable outcome, there are growing signs that individual members of these central banks are convinced that it is. is a good and necessary idea, to preserve the role of their national bank. currencies in a digital world.

But if there is one central bank that is openly advocating for the adoption of a CDBC, it is the ECB. ECB board member Fabio Panetta has explained the benefits of a digital euro to many different audiences this year, perhaps in part because the digital euro does not enjoy all the public support that regulators would have liked. A survey conducted by the European Commission has shown that the overwhelming majority of respondents oppose the adoption of a digital euro.

Read more: The EU faces opposition from citizens in the race for the digital euro

But the message that a digital euro can provide financial stability, accessibility and other benefits in the digital age came from the summit this week. ECB President Christine Lagarde wrote in a blog post that the digital euro is “an anchor for the whole payment system”.

The general message is that public money is necessary even for the success of other types of private money, because people believe that private money can always be converted into central bank money.

“[P]private providers cannot truly replicate the role of central bank money,” Lagarde wrote.

Crypto assets cannot guarantee one-to-one convertibility with central bank currency because they are not an efficient means of payment, she argued. And stablecoins are vulnerable to runs.

Another good reason to embrace a digital euro, Lagarde wrote, is that private sector solutions tend to be dominated by a handful of vendors. These companies, including Big Tech companies, can grow rapidly, “increasing the risk of abusive behavior in the marketplace.” The main concern of the ECB is not only that private companies dominate the payments sector, but that these companies are generally non-European companies and that they could eventually dominate the European payments market.

Thus, the conclusion that the ECB has drawn from these risks is that to preserve a stable and reliable payment system in Europe, and to protect the strategic autonomy of European payments and monetary sovereignty, it is necessary to have a digital euro. . This statement, and others like it, suggest that discussions of a digital euro at the ECB, and possibly other EU institutions, are moving from whether a CBDC is needed to how to design a CBDC that appeals to everyone.

And that’s what the second part of Lagarde’s message is about, advocating for a digital euro that provides solutions for consumers, merchants and the financial system, including banks.

Lagarde noted that the ECB is expected to complete the “investigation phase” of the digital euro in the fall of 2023. The ECB is already conducting pilot tests with consumers and merchants to learn more about the main issues facing a CBDC. should answer.

After the investigation phase, the ECB might be in a better position to decide what characteristics the digital euro should have, but Lagarde cited a few key principles that are already clear.

For example, a digital euro should be widely accepted, easy to use, inexpensive and secure. It should also benefit people with limited access to digital payments to support financial inclusion. And above all, at least for European citizens, it must protect privacy.

Read more: Like its predecessor, the digital euro will require security, mobility

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NEW PYMNTS DATA: HOW UTILITIES AND CONSUMER FINANCE COMPANIES CAN IMPROVE THE BILL PAYMENT EXPERIENCE

About: More than half of utilities and consumer finance companies have the ability to digitally process all monthly bill payments. The kicker? Only 12% of them do. The Digital Payments Edge, a collaboration between PYMNTS and ACI Worldwide, surveyed 207 billing and collections professionals at these companies to find out why going digital remains elusive.

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