Europe is about to launch what could be a revolution in the financial system as we know it
It's far from a guarantee, but it's very likely that the European Central Bank (ECB) will start channeling efforts into issuing its own central bank digital currency (CBDC) — the digital euro.
This is, at least, the “guess” of the institution’s president, Frenchwoman Christine Lagarde.
In October, the ECB published the report on the digital euro, which analyzed, for example, the motivations that would lead it to become a reality or the obstacles that would have to be overcome, whether it would be a substitute for physical money or not.
Some of these considerations were taken up this Thursday (12) by Christine Lagarde, who participated in a monetary policy panel within the scope of the ECB Forum 2020, with her North American counterparts, Jerome Powell, chairman of the North American Federal Reserve (Fed) and Andrew Bailey, governor of the Bank of England.
The president of the ECB clearly said that the “digital euro will not be a substitute for physical money, it will be a complement”, and that the central bank will have to carry out a more in-depth study if “if it is cheaper, faster, safer for users” than physical cash.
“If it contributes to improving the sovereignty of monetary policy and the autonomy of the euro zone, then we should explore” the digital euro, said Christine Lagarde.
The digital euro is a digital currency, but it is not the same as the one we are already used to. When we make a transfer, for example, via MB Way, we are using a digital currency.
More autonomy, more control
The digital euro is different in that it would allow ordinary citizens to open a bank account directly with the central bank.
Put another way, it is a central bank digital currency made available to the general public for use in everyday payments.
At the extreme, the digital euro would completely change the relationship we have with the bank, since we would have direct access to the central bank, where we would have an account and where we could receive, for example, our salary.
The decision on a more in-depth study of the digital euro will be taken when the reflection, which is already underway, on the pros and cons of the possible issuance of CBDCs in the euro area, and the associated legal, functional and technical issues, ends.
This reflective exercise is scheduled to end on January 12, 2021.
“We are not racing to be first,” said Christine Lagarde. “My guess is that we will go in that direction [of studying the digital euro]. But this does not mean that it will be available immediately, because we will still have to address issues such as money laundering and terrorist financing, privacy issues and the appropriate technology that would support digital currency”, said the president of ECB.
Unlike physical money, which leaves no trace and is truly the only anonymous currency, a digital currency would always leave some trace, something that issues with privacy and privacy. GDPR would have to be resolved in a timely manner.
What is certain is that the decision is far from being taken in Europe, the same is happening on the other side of the Atlantic, in the United States. But it is already advanced in Brazil, with the implementation of PIX.
What is on the table, under discussion, could turn current paper notes into museum pieces – and reach the point of having a single currency in the world.
With information from Reuters/AFP/Repubblica
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