Digital currency taking over cash’s place “is a very dangerous notion and should be abandoned,” according to European Parliament member Markus Ferber.
“The uptake of virtual means of payments must not lead to the abolition of cash,” said Ferber, in an email.
His comments follow yesterday’s speech by Benoît Coeuré, member of the executive board of the European Central Bank (ECB), which suggested the central bank was considering 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.
Ferber would prefer a regulated ECB digital currency to current privately mined cryptocurrencies. However, he casts doubt over the usefulness of such a development.
“Right now, the key business model of virtual currencies is regulatory arbitrage. Virtual currencies are a useful tool if you want to dodge the tax man, launder money or purchase illegal goods. If you strip that away, there remain very little legitimate use cases. So, I doubt an official digital currency would take off,” he said.
Coeuré’s speech referenced the decline in cash payments in Europe and suggested the continent required further direction. “20 years after the introduction of the single currency, we still do not have a European card scheme,” he said.
Despite decreasing cash usage, a cashless future presents new complications, according to Ferber.
“The idea is not to abandon cash as long as there is a demand for it,” a representative at the ECB told Payment Eye.
“Our line on [central bank digital currency] is very cautious … there are risks for banks intermediation we are very aware of.
“A private solution for fast cheap instant pan-European payment is the best way forward.
But we cannot stop looking at the central bank digital currency, and assess pros and cons.”
Moreover, Ferber thinks an ECB digital currency would mostly serve to benefit payments from outside the euro area.
“I do not see many deficiencies in the European payment sector, particularly if we could boost the take-up of instant payments in the retail space. Where a digital currency could make an impact in bringing costs down though is for payments outside of the euro area or from within Europe to outside Europe. In that space, there is a lot room for efficiency gains and an official virtual currency might be able to improve things, particularly in bringing costs down.”
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