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Saturday, November 28, 2020

ECB’s board member says the bank must prepare to issue a digital euro

  • Reportedly, the digital euro would complement cash instead of replacing it.
  • According to Fabio Panetta, a digital euro would help in extreme conditions such as pandemics.
  • Panetta believes creating a digital euro shows Europe’s willingness to embrace change.

Fabio Panetta, a member of the executive board of the European Central Bank (ECB), has suggested that the bank should prepare to issue a digital euro to complement banknotes if and when it becomes necessary. A blog post on October 2 unveiled this news noting that a digital euro has the potential to address situations in which citizens have either abandoned cash, where foreign forms of electric money have become prevalent, or when other means of payments have become unavailable.

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Per the blog post, digitization is spreading rapidly to all aspects of modern society, disrupting cultural, social, and economic fabrics in the process. As a result, payment methods have suffered the same fate. Due to these changes, major central banks across the globe have been researching on how to create digital versions of their currencies to address the increasing demand for electric means of payments. Additionally, the banks aim to gain a competitive edge over private tokens such as bitcoin (BTC) and Facebook’s proposed Libra stablecoin.

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In the publication, Panetta noted that ECB needs to be ready to issue a digital euro should developments deem it fit. He added that the bank should already be making preparations towards reaching this feat.

Europe’s willingness to embrace change

According to the blog post, a digital euro would help preserve the public good that the euro currently offers. This involves providing costless access to a simple, universally-accepted, risk-free, and trusted means of payment. The digital version of the euro would allegedly come in handy in a wide variety of situations. These include instances in which people are no longer interested in making cash payments or in extreme situations such as natural disasters or pandemics.

Additionally, the publication noted that a digital euro would help protect the euro area against the potential of an externally-controlled digital means of payment. Purportedly, such a coin would be capable of raising regulatory concerns and threaten financial stability or even the region’s monetary and financial power.

While it is significant for ECB to focus on creating a digital euro, the currency would complement cash instead of replacing it. The blog post went on to state that both means of payments would offer people greater choice and easier access, enhancing financial inclusion in the process. Also, creating a digital euro would allegedly be a symbol of Europe’s willingness to embrace change and spearhead the digitization of the European economy.

However, nothing is set in stone at the moment as the ECB has given itself until the middle of next year to decide whether it going forward with the project is necessary. At the moment, the project is open for public consultation as the bank strives to find a guide for its future work.

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