Central banks in many major countries and regions are exploring the way to establish legal digital currency. Christina Lagarde, the president of the European Central Bank, said recently that the European Central Bank will make a decision on whether to establish a digital currency based on the euro in the euro system within weeks and make it known to the public.
Come to a conclusion in a few weeks
On September 11, Ms Lagarde said in an online event of the Bundesbank that the European Central Bank would make a decision as soon as possible to ensure that the euro does not fall behind the digital currency transformation team. Lagarde said that so far, the euro system has not decided whether to introduce digital euro. But like many other central banks in the world, the ECB is exploring the benefits, risks and operational challenges of doing so. "The findings of the eurotask force are expected to be released to the public in the coming weeks, followed by a public consultation." MS Lagarde said.
MS Lagarde believes that while there is no need to worry about Europe being dominated by foreign digital payment service providers, "the changing global environment" and "increased protectionist policies" pose new risks of transaction disruption. "We have a responsibility to ensure that our citizens have a choice and do not have to be excluded from the payment ecosystem because of the unilateral actions of others."
European Central Bank Governing Committee weidmann also disclosed later that the European Central Bank will discuss the retail number Euro in the next few weeks. He said the central bank digital currency is a complement to, rather than a substitute for, cash, and the European Central Bank should not be allowed to lag behind in central bank digital currency.
At present, major central banks all over the world are studying the creation of official digital currency to resist the competition between bitcoin and other cryptocurrencies. According to bis statistics as of mid July 2020, at least 36 central banks have released plans to retail or wholesale central bank digital currencies. At the beginning of this year, Riksbank began to test its electronic Swedish krona, and the people's Bank of China is also actively testing the application scenarios of digital currency. The Brazilian Central Bank announced in early September that Brazilians are expected to see the central bank's digital currency (CBDC) by 2023.
On September 9, dgen, a Dutch non-profit think tank focusing on financial technology, released a 30 page report entitled "geopolitical impact report on CBDC", which conducted an in-depth study on the status of the world's major legal currencies such as the US dollar, euro and RMB. Dgen predicts that three to five countries will completely replace their currencies with CBDC within 10 years. Dgen stressed that it was necessary for the European Central Bank to create an appropriate environment for the prosperity of the digital euro, otherwise fiat money would face the risk of losing its position in the global economy. The think tank points out that the development of Sweden's e-krona is in line with the country's plan to achieve cashless by 2025. Dgen's report is supported by institutions such as the European Central Bank, Standard Chartered Bank and Frankfurt school.
Retail payment may become the focus
Last year, when Lagarde "jumped" from the International Monetary Fund to the presidency of the European Central Bank, the media had expected that Lagarde might take action in the field of Euro digital currency.
According to Reuters news, the European Central Bank has started to study digital currency at the technical level. In addition to the public digital currency, the European Central Bank is also ambitiously studying several other digital currency options.
According to Lagarde's latest statement, retail digital currency may become the earliest target of Euro digital currency.
Lagarde believes that the digital euro will be more useful to retail users, enabling them to gradually abandon the use of banknotes for digital payments. Lagarde pointed out that if the European Central Bank is determined to promote the project, the important premise of the project will be to provide digital payment channels for euro zone residents.
Cash payments are still common in Germany and other euro zone countries. In June, ECB executive director Arnold Schnabel said cash was still very popular in the eurozone, but there were some differences among Member States. The ECB is ready to explore innovations such as digital currencies, but has no intention of giving up cash.
This means that if the European Central Bank launches an official digital currency, it needs to take some measures to enhance its attractiveness.
Opportunities and challenges coexist
Although ECB officials believe that in the process of moving to digital currency and global payments, the establishment of the euro digital currency is essential to ensure that the euro system does not fall behind the ranks. New technologies can improve the efficiency of financial transactions and make it easier for Europe to innovate, but it can also take risks.
At present, the Federal Reserve, the Bank of Japan and the Bank of England are cautious about the idea of introducing official digital currency. MS Lagarde also highlighted some of the risks involved in the central bank's digital currency, such as the possibility of "hollowing out" the banking sector.
European central bank executive board Panetta said the impact of the central bank's digital currency on the euro in areas such as monetary policy, financial stability and payment systems needs to be thoroughly evaluated. If the central bank's digital currency is allowed to be used outside the euro area, it is likely to have an impact on the global monetary and financial system.
Senior officials of the European Central Bank revealed that the ECB digital currency is expected to make progress in the coming months, but they believe that the project still faces many technical and legal challenges, which will not be solved in the short term, but will exist in the long term.
In addition, it is reported that people in euro countries are worried about replacing cash with fiat money