The European Central Bank is evaluating the possibility of continuing studies on the digital euro until mid-2021, so as not to lag behind the rest of the world
The European Central Bank (ECB) released a report on 2 October, in which it reveals that next year it will carry out further studies on the digital euro. Digital currencies issued by central banks (CBDCs) have become a topic of discussion in the financial world, with several central banks around the world reporting on the development of digital currencies.
However, before the CBDC can be developed, the ECB wants to conduct a comprehensive study on the digital currency.
The report looked at the different ways in which the digital euro can affect retail payments and lead to safer payments in the future. In addition, the ECB will also analyze the cryptocurrencies that will fit in the existing Eurosystem. For the time being, it is not known whether, or when, the ECB intends to launch the digital euro, as at the moment there is still no defined model to be adopted.
The digital euro will contribute to the digitization of the Eurosystem
The bank presented three main reasons for issuing the digital euro. One of the reasons cited by the ECB is that the digital euro could support the digitization of the Eurosystem.
The report states that a digital euro can be issued to support the digitization of the Eurosystem and the EU’s strategic independence. It could also be issued to reduce the role of money as a means of payment, to contain the spread of foreign CBDCs and private digital payments in Europe, as well as to mitigate the risks of regular payment services.
According to the report, a digital euro could support the European Union (EU) goal of providing its citizens with access to a secure form of money in the evolving digital world. In doing so, Europe would continue to play a key role in innovation.
Another advantage of the digital euro is that it would contribute to the strategic autonomy of the Eurosystem, offering citizens an alternative to foreign payment service providers, ensuring quick and efficient payments in the euro area and beyond.
The ECB mentioned some criteria that the digital euro must fulfill if it is created: the digital euro must be in line with the latest technology. It must have distinctive money features, be free, easy to use and protect citizens’ privacy. The digital euro must also be available outside the euro area, respecting the environment and the economy. The ECB is considering the digital euro as a form of payment to help prevent price fluctuations.
Currently, the ECB has not yet decided whether or not to develop a digital euro. However, ECB President Christine Lagarde, while supporting the adoption of the digital euro, specified that it will not immediately replace fiat currency.