ECB suggests digital currency developments

Benoît Coeuré, member of the executive board of the European Central Bank (ECB), has suggested that the central bank is considering launching a digital currency.

“A central bank digital currency could ensure that citizens remain able to use central bank money even if cash is eventually no longer used. A digital currency of this sort could take a variety of forms, the benefits and costs of which the ECB and other central banks are currently investigating, being mindful of their broader consequences on financial intermediation,” said Coeuré, at a joint conference of the ECB and the National Bank of Belgium this morning, in Brussels.

A representative at the ECB told Payment Eye that the central bank is “looking into a central bank digital currency (CBDC) like all major central banks in the world,” saying that the organisation is assessing pros and cons and that the process will take a while.

Talk of CBDCs has intensified in recent months following China’s intent to launch its own digital currency in the new year. Whether the dollar and the euro should follow suit is up for debate.

“I’ve heard there are some people thinking about an ECB cryptocurrency,” says a source close to the project. “But not much more can be said at this time.”

Another driver of CBDCs is the advancement of Libra, Facebook’s digital stablecoin announced in June. Coeuré hinted at the ECB working to counter such advances.

“Relying exclusively on non-European and new ecosystems presents two risks, however,” said Coeuré. “The first relates to the untested nature of some initiatives. Global stablecoin arrangements, for example, raise potential risks across a broad range of policy domains, such as legal certainty, investor protection, financial stability and compliance with anti-money laundering requirements,” he said.

“The second risk relates to the autonomy and resilience of European payments systems.”

Nonetheless, he said that new currency advances will continue to emerge given changing customer expectations.

“These initiatives highlight the rapidly rising consumer demand for payment services that work across borders and that are also faster, cheaper and easier to use. Among younger people in particular, there is a willingness and curiosity to use new technologies and try new providers.”

 

Coeuré is set to leave the ECB in January to join the Bank of International Settlements (BIS) in leading its innovation hub, according to the Financial Times. The Bank of Italy’s senior deputy governor, Fabio Panetta, is set to replace him.

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