President Lagarde: ECB Is Still Researching CBDC, But Won’t ‘Crowd Out’ Private Digital Assets
In the ECB’s President first remarks of 2020, Lagarde spoke at length on the future of the central bank’s development of a digital asset, CBDC. Moreover, the ECB head said the central bank will focus on its digital asset developments without crowding out or discouraging the private sector.
European Central Bank (ECB) President, Christine Lagarde, has been on the forefront championing the introduction of digital cash payment systems in the region as people move away from physical cash.
Lagarde on cryptocurrencies: We are looking into the feasibility and merits of a central bank digital currency that would ensure that people can continue to use central bank money even if the use of physical cash eventually declines. We want to play an active role (5/6)
— European Central Bank (@ecb) January 8, 2020
According to a recent interview with Challenge, the head of the ECB reaffirmed her commitment in the future of the central bank digital currency (CBDC) saying the ECB wants to play an active role in the switch to digital money.
On the subject of digital currencies and the central bank’s plans to launch the CBDC stablecoin, Lagarde said the bank is moving in tandem with the increasing innovation in the area of financial payments and the,
“Eurosystem in general and the ECB in particular want to play an active role in this field.”
While the current cryptocurrency system is heavily adopted by millennials and younger generations as payment systems given the convenience it offers round the clock, the ECB head believes a wide range of use for digital cash such as optimizing payments and supply chain processes.
While the central bank assesses the costs and benefits of CBDC, Lagarde insisted on an incentive for digital currencies in order for adoption across the public to increase to sensible levels. She said,
“For digital cash to be a success, there has to be an incentive to adopt it.”
Furthermore she emphasized that monetary control policies remain key even if the general adoption of the CBDC grows across the public. Nonetheless, the developments by the ECB on their digital currencies will be limited to the financial systems under their scope with Lagarde stating the central bank will neither crowd out nor discourage private investment in the field. Lagarde said,
“However, the prospect of central bank initiatives should neither discourage nor crowd out private market-led solutions for fast and efficient retail payments in the euro area.”