The European Central Bank is showing an increased interest in digital money as its President Christine Lagarde had talked several times on the topic recently. The latest is at a virtual IMF event, where crypto enthusiasts might have been energized by her speech, even though it had nothing to do with traditional cryptocurrencies like Bitcoin or Ether.
We see more central bankers talking about CBDC, after in September BOE’s Bailey expressed his views on the matter. After recognizing that stablecoins could offer some useful benefits, he slammed Bitcoin, claiming it is a high-risk investment.
ECB and digital Euro
Earlier this month, the ECB published a comprehensive study, highlighting some of the benefits of a digital euro, mentioning that it could “help citizens with access to quick money” as the world continues to move towards increased digitalization.
During a virtual IMF meeting that took place yesterday, October 12th, Christine Lagarde the central bank is “very seriously considering a digital euro”, according to a recent report from Business Insider. To support this view, she mentioned that the COVID-19 pandemic led to numerous structural changes in the way people work, trade, and pay.
She continued to say that countries like Germany and Italy embraced digital payments, even though cash payments were very popular, and at the same time, talked about the one-fifth increase in e-commerce since February this year, as a result of lockdown measures imposed across most of the European countries.
Government-owned crypto to have an upper hand against traditional tokens
Although we see an increasing interest from central banks when it comes to digitalization, one of the negative aspects is the low trust in traditional cryptocurrencies. Due to multiple vulnerabilities (volatility, lack of transparency, money laundering, etc.) governments are more inclined to create their own version of digital money rather than relying on a traditional solution.
In the past article, we’ve seen how Ethereum fees skyrocketed in the past two months, communicating the system is not yet able to handle a vast number of transactions. In case such a project will become globally accepted, it won’t be able to meet the requirements, in the current stance.
However, Christine’s Lagarde speech on the digital euro is confirming that the pandemic had accelerated the shift towards a more digitalized financial industry and that could come with many benefits from the consumers. It is also important to note that based on the ECB’s chief speech, the digital euro will not be a cash supplement and would never replace it.