The European Central Bank (ECB) hasn’t been too vocal about its plans regarding a Central Bank Digital Currency (CBDC), or in this case a Digital Euro. However, the central bank has recently published a comprehensive report on the digital euro, stating that it needs to be prepared for a time when a CBDC becomes necessary.
According to a 50 –page report from the Eurosystem High-Level Task Force on central bank digital currency (CBDC) which has been approved by the Governing Council, a digital euro would be launched to complement cash, not replace it.
Hence, the ECB states that it hasn’t finalized the issuance of a CBDC, but “we should be prepared to issue…should the need arise.”
Digital Euro not coming anytime soon
The ECB has highlighted for scenarios that would compel the launch of a CBDC. The report states these scenarios as: an increased demand for electronic payments, a “significant” reduction in cash use, the launch of a global private means of payment, and “a broad take-up of CBDCs issued by foreign central banks.”
Christine Lagarde, president of the ECB, noted that Europe has seen a rise in demand for digital options for spending, saving, and investing.
“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,” she said.
The ECB has described the digital euro as an electronic form of central bank-issued money that is accessible to all citizens and firms and one that improves the payment experiences.
On the technical front, the ECD said its CBDC “can either be centralised, with all transactions recorded in the central bank’s ledger, or feature some decentralisation of responsibilities to users and/or supervised intermediaries.”
However, it stressed the fact that the back-end infrastructure would be controlled by the bank.
Fabio Panetta, member of the ECB’s Executive Board and chair of the CBDC task force, said:
“Whether or not we need a digital euro is a fundamental and pressing question, and the ECB and the national central banks of the euro area are considering it together.”
Meanwhile, the ECB believes that it is capable enough to over challenges involved in the creation of a CBDC. The report adds:
“A digital euro would preserve the public good that the euro provides to citizens: free access to a simple, universally accepted, risk-free, and trusted means of payment. It also poses challenges, but by following appropriate strategies in the design of the digital euro the Eurosystem can address these.”
As of now, the ECB will accept public comments on the report starting October 12, adding that experimentation will continue in parallel.