- European Central Bank president Christine Lagarde said Monday the ECB is “very seriously” looking at the creation of a digital euro.
- At a virtual IMF event, Lagarde said the pandemic has caused many structural changes including the way “we work, we trade, and we pay.”
- She said e-commerce rose by almost one fifth in terms of volume and size between February and June 2020 due to the pandemic.
- But she said a digital euro will only be a “supplement” to cash, and would never replace it.
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The European Central Bank moved a step closer to exploring the creation of a virtual currency, after president Christine Lagarde said on Monday it was “very seriously considering” a digital euro.
At a virtual meeting hosted by the International Monetary Fund, Lagarde said: “The ECB is very seriously looking at a digital Europe.”
She said the COVID-19 pandemic has led to many structural changes including the way “we work, we trade, and we pay.”
Digital payments have increased significantly as a result, particularly in countries such as Germany and Italy where “cash was king,” Lagarde said.
“People [used to] walk around with banknotes in [Germany and Italy],” she said.
Lagarde said the pandemic caused e-commerce to rise by almost one fifth in terms of volumes and sales between February, when the outbreak first hit Europe, and June this year, when many of the toughest lockdown restrictions eased.
“There is much more confidence in digital payments and significant change is underway,” she added.
In a study published earlier this month, the ECB said a digital euro would help citizens with access to quick money in a fast-changing digital world.
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“We should be ready to issue a digital euro if, and when, developments around us make it necessary,” Fabio Panetta, member of the European Central Bank’s executive board said in a blog post related to the study. “This means that we already need to be preparing for it.”
The bank previously said the Eurosystem – the ECB and the national central banks that have adopted the euro – will take a decision by the middle of next year whether to go ahead with the proposal.
The Eurosystem will have to consider major concerns such as potential cyber risks, right to privacy, and whether a central bank introducing a digital currency means that it would acquire sensitive information on users.
It will also have to look into legal considerations such as the implications of different design features and the basis for issuance.
Lagarde said a digital euro would not replace cash, merely supplement it.
“A digital euro will never be a substitute for cash. It is a very good supplement and a very good partial substitute for what was being done physically.”
Cryptocurrencies such as Bitcoin, or Ethereum, have grown in popularity among traders and online shoppers. The total value of the crypto market has grown to around $US360 billion this month, from around $US175 billion just three years ago, according to data from CoinMarketCap.com.
A number of central banks have started trialling digital payments.
The People’s Bank of China began trial use of a digital yuan, currently the world’s first digital currency backed by a central bank, in four major cities earlier this year, according to the Guardian.
Sweden’s Riksbank has been testing an electronic form of the krona for several months.
But other major central banks such as the Federal Reserve, the Bank of Japan, and the Bank of England have taken a more precious approach to the introduction of central bank-backed digital currencies.