The European Central Bank (ECB) “should be prepared” to possibly launch a digital currency, ECB President Christine Lagarde said yesterday, adding that the public would be asked to weigh in on the issue.
The Frankfurt, Germany-based bank is to carry out a series of experiments with a digital euro over the next six months and launch a three-month public consultation from Oct. 12.
A decision on whether to move ahead with a virtual currency project is expected in about the middle next year, it said.
“Our role is to secure trust in money... We should be prepared to issue a digital euro, should the need arise,” Lagarde said in a statement.
This digital currency would “complement cash, not replace it,” the statement said.
The move comes as people increasingly pivot toward cashless payments, and the ECB is wary of falling behind so-called cryptocurrencies issued by private players like bitcoin and Facebook’s yet-to-be-launched Libra.
A digital currency would allow individuals as well as companies to have deposits directly with a central bank, potentially safer than with commercial banks, or cash that could be stolen.
The ECB’s deliberations echo those of the US Federal Reserve, which has been researching a digital dollar.
The People’s Bank of China in April started experimenting with digital currency in four cities.
Proponents of cryptocurrencies say they allow for faster and cheaper payments, especially across borders, as they cut out the staff, administration and the high costs needed in traditional banking and investment.
Governments in Europe have insisted that any digital currency would require careful supervision.
“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,” ECB executive board member Fabio Panetta said.
Many hurdles remain, including concerns about privacy and the impact on traditional banking and financial stability, Panetta said.
However, “a properly designed digital euro could address these risks,” he said.
The COVID-19 pandemic has accelerated the shift toward electronic payments, as people avoid notes and coins over fears that they might spread the novel coronavirus.
The ECB applied to trademark the term “digital euro” late last month, Bloomberg News reported.
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