The European Central Bank is anxious to extend its role in creating central bank digital currencies (CBDCs), but that doesn’t mean private entities can’t join the effort, stated President Christine Lagarde.
In an interview on January 8 with French business magazine, Challenges, Lagarde said the ECB intends to assume a dynamic role in digital currencies. As businesses and individuals create more cross-border payments nonstop, Lagarde stated the bank would keep researching “the feasibility and merits of a CBDC.”
Lagarde, who earlier stated the ECB must be “ahead of the curve” with regards to CBDCs, included the bank wouldn’t like to disrupt the general flow of digital currencies made outside its circle. “[T]he prospect of central bank initiatives should neither discourage nor crowd out private market-led solutions for fast and efficient retail payments in the euro area,” she stated.
CBDCs may have critical implications for the alliance’s financial sector and changes in fiscal approach moving forward, Lagarde stated. The ECB established a digital currency task force a month ago that would work intimately with eurozone central banks to know the advantages and disadvantages of a potential eurozone CBDC.
Worldwide interest for CBDCs came soon after the uncovering of Facebook’s Libra in the summer. In spite of the fact that the People’s Bank of China (PBOC) has been developing its “digital yuan” for years already, authorities just began disclosing details on it late last summer, purportedly concerned private initiatives could take market share before the government-issued currency rolled out.
Also, CBDCs may furnish residents with a method for exchange in case “physical cash eventually declines,” probably in combination with private cryptocurrency efforts.
Most central bankers have depicted the connection between digital currencies, CBDCs, and fiat currencies as adversarial and exclusive. Mark Carney, the outgoing Bank of England Governor, stated a year ago a multi-fiat-backed CBDC could well supplant the U.S. dollar as the prevailing worldwide reserve currency. IMF Chief Economist Gita Gopinath contended digital currencies, including CBDCs, needed a major framework and worldwide acknowledgment to effectively handle the greenback.
In spite of the fact that Lagarde has stated digital currencies could address huge numbers of the issues with the legacy financial framework, she said they might also showcase new risks to clients. A month ago, she communicated concern Facebook could utilize its digital platform to lock out competitor stablecoin operators and thus gain an unfair advantage.