European Central Bank (ECB) Must be Ready to Issue a Digital Euro, Says Board Members
ECB board member Fabio Panetta said on Friday that the European Central Banks should be preparing to issue a digital euro.
In a study published on Friday, the ECB said a digital euro could help an environment where citizens have abandoned cash, other means of payments became unavailable, or foreign forms of electronics have taken over.
“We should be ready to issue a digital euro if and when developments around us make it necessary,” said Panetta in a post accompanying the study. “This means that we already need to be preparing for it.”
(THREAD) As technological changes are transforming how we pay, a digital euro could offer a universally accepted, risk-free and trusted means of payment to complement cash. We’ve analysed its possible benefits and challenges in our report https://t.co/RiwOCers68 1/3 pic.twitter.com/FLv1eRAkBL
— European Central Bank (@ecb) October 2, 2020
Open for public consultation that will start Oct. 12; the ECB has given itself until the mid of next year to decide whether to go forward with the project, which would start with an “investigation phase.”
“Our role is to secure trust in money,” said ECB President Christine Lagarde. With this, she means making sure “the euro is fit for the digital age,” and should the need arise, be prepared to issue its digital version.
Digital euros will give holders a direct claim on the central bank and could be transferred directly between users — typically an option only for governments and commercial lenders, making them safer than any deposits.
As it has implications for financial stability and monetary policy, the ECB report urged to assess whether a digital euro should be accessible by firms and households directly or indirectly via intermediaries.
The ECB also said deposits in digital euros might be capped and subject to its interest rate on deposits, which is minus 0.5% currently. Instead of just by the ECB, they would also be offered by the private sector, it said in the study.
A digital euro “is becoming an obligation which, indeed, central banks — need to carry out,” said ECB Vice President Luis de Guindos in an online discussion on Friday.
In a sign that ECB is serious about a central bank digital currency, it applied to trademark the term “digital euro” last week.
While the People’s Bank of China is already working on the testing of its CBDC, the US Federal Reserve and the Bank of England are still discussing the possibilities around the digital version of their respective fiat currencies.