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ECB moves a step closer to the creation of a digital euro

ECB moves a step closer to the creation of a digital euro

The European Central bank is to conduct a public consultation on the possible creation of a digital euro, after a high-level taskforce sketched out possible scenarios that would require central banks to mint their own cryptocurrency.

The Eurosystem task force, bringing together experts from the ECB and 19 national central banks of the euro area, reported that an increased demand for electronic payments in the euro area could require a European risk-free digital means of payment.

Issues that might provoke the issuance of a digital euro include a significant decline in the use of cash as a means of payment and the launch of a global private currency, such as facebook's Libra, that might raise regulatory concerns and pose risks for financial stability.

“The euro belongs to Europeans and our mission is to be its guardian,” says Christine Lagarde, ECB president. “Europeans are increasingly turning to digital in the ways they spend, save and invest. Our role is to secure trust in money. This means making sure the euro is fit for the digital age. We should be prepared to issue a digital euro, should the need arise.”

The public consultation will be launched on 12 October, but experimentation on the foundations for a euro-wide digital currency will start in earnest, without prejudicing the final outcome of the talks.

Bloomberg yesterday confirmed that ECB lawyers at the German firm Bock Legal applied for the European Union Intellectual Property Office's "digital euro" trademark on September 22.

“Technology and innovation are changing the way we consume, work and relate to each other,” says Fabio Panetta, member of the ECB’s executive board and chair of the task force. “A digital euro would support Europe’s drive towards continued innovation. It would also contribute to its financial sovereignty and strengthen the international role of the euro.”

The ECB report coincides with news from Estonia's central bank of a multi-year project to investigate how suitable the KSI Blockchain - a core technology of e-government in Estonia - could be for operating the digital money infrastructure of a central bank.

It is one of a number of co-ordinated research projects being undertaken by EU central banks at the behest of the ECB.

“Eesti Pank as a small central bank chooses carefully which Eurosystem development projects we are able to contribute to meaningfully," says Rainer Olt, head of payment and settlement system as Eesti Pank. "Estonia has over the years developed unique know-how in running a digital government that prioritises security, privacy and efficiency. This experience gives us good grounds for launching a project to explore the technological frontiers of digital money."

Comments: (1)

Christopher Williams
Christopher Williams - RTpay - Winchester Uk 02 October, 2020, 10:24Be the first to give this comment the thumbs up 0 likes

Of the many benefits of a digital euro, being able to assist those who are unbanked or under-banked is an obvious primary target. In particular, how to assist remittances and donations is an area where the potential is great, not least in assisting better exchange rates for these small but critical transactions.

There can be situations where national central banks/ governments of Member States can encourage more support payments - even from other MS - by adjusting the FX rate for Euro/ Euro transfers, let alone from all other currencies, for the strictly limited roles of remittances and donations. 

Digital currency reporting and control proceedings can speed up such functions,something sorely needed during these difficult times for many of those most in need.