The ECB says it is still assessing whether to introduce a digital euro and that it will soon share findings of a task force before launching a final public consultation.
“The Eurosystem has so far not made a decision on whether to introduce a digital euro,” said Christine Lagarde, ECB President. “But, like many other central banks around the world, we are exploring the benefits, risks and operational challenges of doing so.”
Lagarde said the findings of a task force will be “presented to the public in the coming weeks, followed by the launch of a public consultation.”
Lagarde stressed that these efforts were a testament to the ECB’s “readiness to face the ongoing digital transformation in retail payments, which does not necessarily follow a linear path.”
“In the digital age, innovation in payments enables us to interact in easier, faster and cheaper ways,” she said.
However, recently, dGen, a non-profit think tank focused on emerging technology, published a paper exploring central bank digital currencies (CBDC). In particular, it looks at a potential digital Euro and the geopolitical ramifications of CBDC.
It predicts that a digital yuan will not unseat the US Dollar but represents a major challenge to the world’s number two reserve currency, the Euro. In fact, dGen says that Europe needs a CBDC by 2025 to stop this happening.
It quotes Philipp Sandner of the Frankfurt School Blockchain Center: “[The] ECB’s reaction has been too slow. Especially, the benefits from a CBDC for the industry, e.g., based on programmable money, are currently neglected. Given Libra and the [Chinese] DC/EP, the ECB has to react quickly to keep its geopolitical position”.
The digital yuan has not yet launched, but testing of the DCEP is progressing. That said, if it is to overtake the Euro, it has some catching up to do. Right now, the yuan or renminbi is in the fifth spot in terms of global reserves at $221 billion. That compares to the US Dollar with $6.8 trillion and the Euro with $2.2 trillion. The other top-five currencies are the Japanese Yen and the British Pound. Last week Morgan Stanley predicted that the yuan could claim the number three spot within ten years.
Lagarde, on the other hand argues that innovation comes in new forms which “create new risks and pose important questions of sovereignty.”
“They raise new questions about whether the ECB should drive initiatives to integrate retail payments in Europe, and even whether it should issue a digital euro,” she said.
According to her, the ECB was committed to its “duty to play an active role in balancing the risks and benefits of innovation in payments, so that money continues to serve Europeans well.”
“Central banks can and should, within their mandates, be agents of change and fulfil their responsibilities towards citizens,” she concluded.