ECB Digital Currency Faces Challenges, Though Progress Could Be Made in the Next Few Months
- The launch of a digital currency by the European Central Bank is meant to be discussed at an upcoming meeting.
- The possibility of launching this type of currency was a response to the private cryptocurrency proposed by Facebook’s whitepaper on Libra.
Digital currency is becoming more of a possibility for financial institutions, and recent reports from Reuters revealed that the European Central Bank had been learning more about offering their own. Speaking with senior officials today, Reuters stated that there is a chance the ECB will have some progress on their digital currency. However, the project seemingly will be facing some difficulties in the way for quite a while.
The plans to launch a public digital currency in Europe arose after Facebook decided to release their whitepaper for Libra, a private digital currency. The new digital asset by the social media giant caused concern amongst regulators, and the project could soon be banned in the region.
Launching a public cryptocurrency would offer an alternative for Libra and similar private projects. It would also reduce international transaction costs; which EU officials state are fairly high.
French Finance Minister Bruno Le Maire stated that it would likely take quite a while for a European public version of the Libra token to come out, while speaking at a news conference.
“The fact that it is for the long term does not prevent us from working and having results next year.”
An official of the EBC stated that the local central bank was already trying to filter through the technical aspect of this potential currency, though it plans to offer clarifications soon. Furthermore, the issue was discussed amongst finance ministers on Friday during a meeting in Brussels. During the next gathering, scheduled in December, the finance ministers are expected to issue a joint statement, expressing their welcoming attitude on the work for this project.
Valdis Dombrovskis, the finance commissioner of the EU, expressed that the announcement of Libra made the local finance industry more aware that there is a lot to be desired in cross-border payments. The costs are still too high and the appeal of having an efficient and inexpensive option is more appealing to the public. Presently, there are several options that the officials are considering.
The most “ambitious” of these plans, says Reuters, is that bank accounts could be open directly by users of the new digital coin. In doing so, transaction costs would drop, but the currency banks and payment services available would essentially become redundant, leaving no advantage between the options. For the “less radical” plan, banks would receive electronic cash and tokens that clients would end up receiving. The officials expressed that, while there is ongoing work on this possibility, the option is still facing legal concerns and technical challenges.
Next week, for the first time under President Christine Lagarde, the Governing Council will be meeting on these new policies. An official stated that this meeting may end up discussing the feasibility of a public cryptocurrency being issued.