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Christine Lagarde, president of the European Central Bank, has said her “suspicion” is that Europe will launch a digital euro. She said at the ECB Forum on Central Banking 2020 yesterday that while the central bank is not “racing to be first”, she believes a decision will be made to move forward with the project.
She went on to:
“If it is going to contribute to better monetary sovereignty and better autonomy for the euro zone, I think we should investigate. If it is going to make cross-border payments possible, which are very laborious in many corners of our big world, then we have to investigate. ”
Her comments come after the ECB announced on October 2 that it would intensify its efforts to explore the development of a digital euro — a so-called Central Bank Digital Currency (CBDC) — with the launch of a public consultation and experiments. However, the digital euro is seen as a supplement to cash, and not as a means of replacing it.
The ECB Task Force also published a comprehensive report on the implications of the issuance of a digital euro, identifying several scenarios. These scenarios include increased demand for electronic payments in Europe, a significant drop in cash usage, widespread adoption of CBDCs issued by other central banks and the launch of global private payment initiatives.
The latter scenario appears to refer to the stablecoin Libra proposed by Facebook, which is widely regarded as a catalyst for central banks’ work on CBDCs. China’s attempt to roll out a digital yuan — which is already being field-tested — is seen as another major boost for Western governments.
At Thursday’s event, Lagarde said that even if the decision is made to go ahead with the digital euro project, it will not be “immediately available”. The ECB should still assess a range of issues, according to Lagarde, including concerns about money laundering and terrorist financing, user privacy, and what technology it will use.
She added that a digital launch of the euro will likely take between two and four years.