Speaking before the Franco-German Parliamentary Assembly, Christine Lagarde the President of the European Central Bank (ECB) said that 'A digital euro could be a complement, not a substitute, for cash'.
In November 2019, the European Central Bank published a report on the issuance of a digital central bank currency (CBDC), which was then presented to the public for comments. On September 10, 2020 Mrs. Lagarde announced that there would be a consultation on the idea of issuing a digital currency in the coming weeks.
In addition, faced with the threat posed by Facebook's Libra project, French Minister of Economy and Finance Bruno Le Maire said that Libra usurped the sovereign right of states to issue their own currencies and could undermine the European project.
Le Maire therefore declared:
'Do we really want to give such a power to private interests, given the consequences this would have on trade and financial stability? I cannot accept that one of the most powerful tools of a sovereign state, monetary policy, should be the responsibility of entities not subject to democratic control'.
Having long supported the central bank that is developing a digital euro to cope with the transition to digitalization, Mrs Lagarde, the president of the ECB had declared last September that it would work to ensure that the European institutions adapt to the changing financial environment by opening up to cryptocurrency.
'In the case of new technologies - including digital currencies - this means being attentive to the risks in terms of financial stability, privacy or criminal activity, and ensuring that appropriate regulation is in place to steer the technology towards the public good. But it also means recognizing the broader social benefits of innovation and allowing them to flourish'.
In another speech last month, Lagarde said that foreign providers have taken the lead in payments innovation because of the lack of integrated infrastructure in Europe, but that a digital euro would allow to catch up.
She said that a future digital euro could be used for retail payments and be 'accessible to a wide public'.
The President of the European Central Bank, Christine Lagarde, spoke at an online meeting of the Franco-German Parliamentary Assembly on September 21. Any digital currency put into circulation in the European Union cannot completely replace the euro, including the Central Bank Digital Currency (CBDC) under development according to Lagarde.
'It could provide an alternative to private digital currencies and ensure that the sovereign currency remains at the heart of European payment systems'.
The bank was studying the advantages of a European Central Bank Digital Currency (CBDC), but that currency would likely continue to play a role in this digital future.
Ms. Lagarde said in her speech:
'We are also studying the benefits, risks and operational challenges of introducing a digital euro'. 'A digital euro could be a complement, not a substitute, for cash. It could offer an alternative to private digital currencies and ensure that the sovereign currency remains at the heart of European payment systems'.
On September 10 2020, during an online conference with the Deutsche Bundesbank, the president of the ECB said that the Eurosystem had not yet taken a decision on the introduction of a digital euro, but that a working group to study the potential effects of a CBDC on Europe would be announced 'in the coming weeks'.
She added that global payments are increasing, as the pandemic has pushed the trend towards digitalization further. Consumer preferences have seen an increase in digital contactless payments as Europeans use online platforms for their retail needs during the pandemic.
'With the digital revolution at our feet, 'more than four out of five Europeans regularly use the internet, compared to one out of five twenty years ago». «At European level, this should be complemented by accelerating progress towards the digital single market to help achieve economies of scale for digital businesses, while addressing key concerns about cyber security and data protection,'
She added that foreign countries have taken the lead in digital payment options, referring to China:
'Europe has fallen behind in this competition. The lack of payment integration in Europe means that foreign providers have taken the lead. In a digital world, consumers must be able to pay with sovereign money'.
On September 10 2020, the European Central Bank also announced that it would not change the ECB's impression of stimulus money, and interest-free loans to businesses seem destined to continue, as it announced that it would make no immediate changes to increase inflation or to modify its pandemic relief program, which remains at a total of 1.35 trillion euros.
According to Bitcoin billionaire Tyler Winklevoss, the fact that the ECB continues to maintain refinancing operations is a 'powerful advertisement for Bitcoin'.
'The European Central Bank's refinancing rate is 0% and its deposit rate is -0.5%. This means that you can borrow money for free, but saving actually costs you money. This is both a powerful recipe for inflation and a powerful advertisement for #Bitcoin'.
The Euro system is currently reviewing its framework for overseeing payment systems. The objective is to create a digital euro in order to provide an alternative to private digital currencies and ensure that the sovereign currency remains at the heart of European payment systems. Despite Lagarde's declaration, the introduction of a digital euro is still far from being achieved.
Written by Laetitia Harson
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