European Central Bank President Christine Lagarde reiterated the Eurozone central bank’s stance that the development of a digital euro is meant to complement, not replace, cash — mitigating fears that Europe’s monetary union is not pushing for a cashless society.
The further solidifying of this stance from Lagarde came via yesterday’s online meeting of the Franco-German Parliamentary Assembly, during which the French politician and lawyer stated:
We need to fully reap the potential gains from digital technologies […] In a more digital economy, we also need to ensure the strength and autonomy of European payment systems. […] We are also exploring the benefits, risks and operational challenges of introducing a digital euro. A digital euro could be a complement to, not a substitute for, cash; it could provide an alternative to private digital currencies and ensure that sovereign money remains at the core of European payment systems.
Sovereign Money Under Threat
Lagarde’s reference to a “private digital currencies” may potentially point to Facebook’s Libra cryptocurrency project and may illustrate a fear that other corporate giants may seek to implement their own private digital currencies.
The Libra project has, thus far, struggled to gain positive traction. Regulators across the world have largely taken an immediate and negative stance against the introduction of private currencies from Big Tech behemoths, like Facebook.
Meanwhile, the recent rise in decentralized finance is also putting pressure on the traditional financial system, especially considering the fact that it coincides with severe economic pressure from 2020’s COVID-19 pandemic — the latter point Lagarde herself acknowledged in yesterday’s speech. With the global economic situation in a highly-questionable state, the ECB presumably feels pressured to advance financial solutions via the latest fintech and blockchain-based techniques.
Europe’s in the middle of the CBDC race
Despite Lagarde’s statement, the introduction of a digital euro is far from a done deal. Currently, a task force assigned to study the potential effects of a central bank digital currency, or CBDC, has yet to be announced — though is expected to be introduced “in the coming weeks.”
The European Central Bank’s potential interest in a digital euro stands somewhere between China’s full-steam-ahead push to introduce its CBDC as soon as possible and the United States lagging approach to the potential future of currency.