ECB lays out timing for decision on digital euro

An ECB working group will soon issue a verdict on the feasibility of developing a digital euro, said ECB President Christine Lagarde.

Euro-zone central banks will soon reveal their verdict on whether the region needs a digital version of the shared currency, according to ECB President Christine Lagarde https://t.co/OsZmnWUuJU

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During a virtual event organised by the German Bundesbank, Lagarde stressed that the initiative could determine the euro area’s alignment with global changes in payment systems.

“We have not yet taken a decision on a digital euro, but, like many central banks, we are studying the benefits, risks and operational costs of such an initiative. The working group will present its findings in the coming weeks, and then we will begin public consultations,” she summarized.

Lagarde added that it is necessary to ensure residents of the euro area have access to a variety of payment options so that foreign payment providers dominating the region cannot harm them unilaterally. She also pointed to rising protectionism, presumably referring to the policies of U.S. President Donald Trump.

In May, the Bank of France reported successful tests of a digital euro for interbank payments. Testing began in March. The central bank was interested in three use cases: payments against financial instruments, payments against the digital currencies of other central banks, and payments against digital assets.

The Dutch central bank also showed similar ambitions. In April, it said it was ready to take the lead in developing the digital euro. The Italian Banking Association (ABI) also offered help in pilot programs.

The debate over the need to launch a central bank digital currency (CBDC) in Europe intensified after Facebook announced Libra. Regulators in France and Germany said that such a development threatens monetary sovereignty of states.

In June 2019, within the G7 a working group to study stablecoins was formed. It was led by Benoît Cœuré, a member of the ECB’s executive board. Later he said that CBDC would be a response to changing behaviour in the payments space.

In December 2019, in her first speech as president, Christine Lagarde said the ECB was working on a digital euro, but its launch could be postponed due to systemic risks. In the same month she pledged to define the goals for the working group on this issue by mid-2020. A few days later the ECB presented a proof of concept for a partially anonymous CBDC on the basis of the Corda blockchain platform.

Calls for the release of the digital euro in the second half of last year were made in Germany, Finland and France. In January 2020, central banks of Canada, the United Kingdom, Japan, the European Union, Sweden and Switzerland, together with the Bank for International Settlements (BIS), formed a group to study CBDC.

For more on CBDC developments in different countries, read ForkLog.

How and why central banks are creating digital currencies (CBDC)

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