Christine Lagarde, who is President of the European Central Bank (ECB), supports the Bank’s commitment to the development of the digital central bank currency (CBDC). This is intended to meet the demand and demand for faster and less costly cross-border payments.
President Lagarde gave an interview to the French business magazine Challenges, which was published on 8th January, in which she indicated the dangers that the world economy could face in 2020. These threats include the worsening situation in international trade and many other uncertainties that concern geopolitical risks and climate change. According to Lagarde the EU will maintain its position as the strongest economic and trade area in the world. The EU still has great potential in this respect.
A digital currency in the European Union
When asked about the European Central Bank’s involvement in the exploration and development of the digital currency (CBDC), the President stated that there was a strong need for low-cost payments. The Central Bank will continuously assess the costs and benefits of issuing the digital currency. Such a currency would ensure that the public would be free to use the ECB’s funds if the availability of physical means decreased or significantly decreased.
President Lagarde also pointed out that the Central Bank is constantly analysing the feasibility and advantages of a digital currency (CBDC). This is necessary because such digital means of payment have an impact on the whole financial sector and are important for the implementation of monetary policy. Christine Lagarde announced that a special task force has been set up within the European Central Bank, composed of experts who have undertaken to work closely with the national central banks. The aim of this cooperation is to explore the possibility of introducing the digital currency in the euro area.
In an interview, President Lagarde was asked about current initiatives at the Central Bank on the introduction of the digital currency (CBDC). In her reply, she said that the ECB is examining this issue from a number of angles, primarily analysing the costs and benefits of the new form of payment. She added that the process is laborious and time consuming. It is therefore necessary to wait for the Central Bank to formulate and pass on its conclusions.
The ECB’s relationship to cryptocurrency
As far as independent digital currencies are concerned President Lagarde has already pointed out for some time that the Central Bank is friendly to this, adding in December 2019 that the ECB should be ahead of the “demand curve for stablecoins”.
A few months earlier, in September 2019, when the present President of the Central Bank was head of the International Monetary Fund (IMF) and was running for the post of the next President of the ECB, she declared that she would do everything possible to ensure that the institutions adapt to a rapidly developing financial environment. The European Central Bank therefore remains open to the digital equivalent of the euro, provided that it is not held by citizens. There is a great deal of promise that in this respect we can count on an acceleration of work.