European Central Bank President Christine Lagarde says a panel of eurozone central bank officials is exploring the pros and cons of a digital euro and will soon reveal whether or not the region needs to create their very own central bank digital currency.
The initiative of a CBDC may be critical to ensure they don’t get left behind in the move to digital currencies and global changes in payments, said Lagarde, in a virtual event with Germany’s Bundesbank. Thursday evening she said,
“The Eurosystem has so far not made a decision on whether to introduce a digital euro. But, like many other central banks around the world, we are exploring the benefits, risks, and operational challenges of doing so.”
“The findings of a Eurosystem task force are expected to be presented to the public in the coming weeks, followed by the launch of a public consultation.”
While the fact that Europe is dominated by foreign payment service providers isn’t necessarily a concern, the ECB president said the “global context” and “increase in protectionist policies” do present new risks.
“We have a responsibility to ensure that our citizens have choice and cannot be excluded from the payments ecosystem due to the unilateral actions of others.”
A digital euro would be useful for retail users that are increasingly ditching banknotes in favor of digital payments. Still, it also poses the danger of crowding out private sector solutions and hollowing out the banking sector.
In the meantime, Sweden’s Riksbank has been testing its e-krona for months now. However, cash remains prevalent in eurozone countries, including Germany.
The Bank of England and the Federal Reserve have taken a cautious approach to introduce a CBDC. People’s Bank of China, meanwhile, is already running a trial for its DC/EP while the Bank of Japan is currently at the research phase of a digital yen.