By Dan Byrne for AMLi
THE PRESIDENT of the European Central Bank has said her ‘hunch’ is that the EU will move to set up a digital euro in the near future – but stopped short of announcing it officially.
Speaking as part of an online panel, Christine Lagarde stated that the decision would rest on the outcome of the consultation period – launched in October and running till January 2021.
“At that point in time we will make the decision as to whether or not we go forward with the digital euro,” she said. “My hunch is that we might well go in that direction.”
She advised, however, that any decision to move the idea forward would be a decision taken collectively, with all relevant stakeholders.
If launched, she suggested that the development process could take up to four years.
The ‘digital euro’ idea has gained traction in recent years as a counterbalance measure to the already existing private cryptocurrencies like bitcoin, or the upcoming ‘libra’ from Facebook.
These cryptocurrencies have been criticised by lawmakers in Brussels for their lack of transparency, and the ease-of-access they offer to financial criminals.
Although laws around cryptocurrencies are tightening to the standards seen for conventional financial services, there is a growing movement for a government-regulated, publicly controlled currency.
In Europe, this movement has been recognised at the most senior levels, with Commission Executive Vice President Valdis Dombrovskis acknowledging in October that the “future of finance is digital.”
Right now, digital versions of global currencies like the euro are primarily in the ‘discussion’ or ‘trial’ phases.
China recently concluded a test phase of a ‘digital yuan’ by selecting ordinary citizens at random, and gifting them the equivalent of approximately €25 to spend.
While the test was deemed by analysts to have “extended China’s lead in the global race to develop a central bank digital currency,” response from consumers themselves was lukewarm.
They largely admitted to preferring the functionality of their current, private-based digital payment methods.
Lagarde acknowledged this challenge by stating that the EU was not “racing to be first” in introducing a digital currency, and that there were still concerns to address around privacy, money laundering and terrorism financing.
She was joined in this cautious approach by Bank of England governor Andrew Bailey and Federal Reserve (American Central Banking system) chair Jerome Powell.
Both spoke of the need to be right rather than be first when it came to developing a central bank digital currency.
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