ECB Exec Bats In Favor Of Digital Euro




A possible European CBDC for retail payments was initially discussed at the start of the year, with the ECB putting CBDCs under a 24-month “investigation phase.”


    An Increasingly Digital Economy

Speaking on behalf of the ECB, Fabio Panetta started off by pointing out that the digitization of the economy is transforming the lives and needs of people and the payment landscape. This is why central banks across the world want people to have better accessibility to sovereign money.

CBDCs have not found much favor with private banks in the past, who have often called them redundant, thanks to the supply of private digital monies that are already available. However, Panetta argued in favor of CBDCs, stating that central banks needed to evolve with the “changing technologies, changing payment habits and the changing financial ecosystem.” He stated that central bank money would play a critical role as a monetary anchor.


    Safe And Guaranteed

Panetta also stated that central bank money is the “safest form of money” in the economy and the “only money whose face value is intrinsically guaranteed.” He also stated that people trust and use private intermediaries due to factors such as convertibility. He highlighted this by stating,

“By providing a monetary anchor, central bank money plays a key role in maintaining a well-functioning payment system and financial stability and ultimately trust in the currency. This, in turn, is a precondition for preserving the transmission of monetary policy, and hence for protecting the value of money.”


    Cash Losing Popularity

The Covid-19 pandemic has seen cash lose significant popularity in Europe. Currently, half of all consumers in Europe prefer to use digital means of payment that do not involve the use of cash.

“Just as the postage stamp lost much of its usefulness with the arrival of the internet and email, so, too, could cash lose relevance in an economy that is becoming increasingly digital.”

Panetta stated that cash is seen as a store of value, with only around 20% used in actual transactions. The ECB adopted a roadmap to adopt a more digital economy as the decline of cash could undermine the anchor role that central bank money plays.


    Digital Euro Roadmap

The digital euro is the ECB’s way of ensuring that the money remains a strong monetary anchor. The ECB is looking to find efficient use cases for a digital euro, with the main goal to provide stability. The ECB has no plans of competing with payment services offered by private services.

“Some have also suggested that innovative private payment solutions such as stablecoins could, if properly regulated, make CBDCs superfluous. (…) However, this would amount to outsourcing the provision of central bank money to stablecoin issuers and risking a corresponding reduction in monetary sovereignty.”


    Different Use Cases

Panetta stated that intermediaries could distribute the “safest and most liquid form of money” and use it to develop new services and generate additional revenue. The ECB also stated that it has no plans of monetizing user payment data, only processing the data for the functioning of the digital euro.


Read the full article at cryptodaily.co.uk

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