European Central Bank (ECB) president, Christine Lagarde, said on Thursday that the EU would make its decision on whether to pursue a digital euro in January 2021. This comes as more jurisdictions pay closer attention to Central Bank Digital Currencies, given the accelerated paradigm shift to virtual payment networks amidst the COVID-19 pandemic.
Lagarde shared her sentiments during the virtual ECB Forum on Central Banking. In-attendance were other prominent monetary authority figures, including the Fed Reserve chair Jerome Powel and Andrew Bailey, Bank of England governor.
While all the three figures commented on the ongoing developments in CBDC, Lagarde hinted that the EU might decide to move forward with a CBDC, although the decision will be made collectively. She stated that,
“We might well go in that direction … My hunch is that it will come.”
Lagarde was also keen to highlight that the ECB is not in a race to be the first but rather seeks to derive value from a CBDC. She noted that if the CBDC option is fast, cheap, and highly secure, then the ECB should explore the possibilities of joining other nations that have forged ahead with CBDC plans.
“If it is going to contribute to better monetary sovereignty, a better autonomy for the euro area, I think we should explore it. If it is going to facilitate cross border payments, which are very laborious in quite a few corners of our big world, then we should explore it.”
Per Lagarde’s time-frame estimates, a digital euro will take at least 2-4 years before it is finally launched. This will allow the ECB to adequately prepare and get it right once the project is ready for mainstream adoption. Some of the ECB issues are still trying to figure out include Anti-money laundering, terror-financing, and users’ privacy.
Notably, the ECB intensified its efforts in CBDC research this year and recently published a report on the possibilities and implications of a digital euro. The central bank also applied for a trademark the name ‘digital euro’ as part of its effort to hedge, should it chose to roll out a CBDC.
The Fed Chair & Bank of England Governor’s Takes
Jerome Powel, who also shared his comments during the virtual policy panel, said that the U.S is committed to looking at the ‘potential costs and benefits of a central bank digital currency.’ However, he reiterated that it is more important to get it right than being first, especially with the U.S dollar’s position as the world’s reserve currency.
Andrew Bailey, the BoE governor, touched on private stablecoins in what seemed to be a warning to issuing authorities. According to him, the bar is very high for stablecoins, given the users’ expectation of value certainty. In fact, he went on to highlight that the bar or answer might actually be CBDCs.
“They haven’t met that bar in my view. And it may be that the answer to that bar is actually central bank digital currency.”