European Central Bank (ECB) president Mario Draghi has reconfirmed to the European Parliament that there are no plans to create a central bank digital currency (CBDC).
Draghi cited a lack of any prevailing economic conditions to warrant such as step, going on to suggest that DLTs hadn’t been severely tested as yet and still required “substantial further development before they could be used in a central bank context”.
The fact that discussions around the world about CBDCs is gaining some impetus hasn’t escaped the ECB or EU financial regulators, particularly in the light of Sweden’s Riksbank considering its own e-krona due to dwindling interest in cash and a rise in the use electronic money in that country.
The ECB, at one time scathing in its condemnation digital currency, has recently demonstrated a change of its stance, even suggesting that cryptocurrencies have a place in the future. It recently suggested that the financial body should begin to “…work on exchanges and platforms which provide services at the interface between crypto-assets and the real economy”. The comments were made earlier this year by Bank of France Governor Francois Villeroy de Galhau who also sits on the ECB’s Governing Council.
Bitcoin’s rising popularity currently feeds the debate globally whether the future direction of money is electronic rather than paper. The ECB chief has suggested however that an ECB digital currency would mean that the central bank would set itself against the banking sector in such a scenario and lead to potentially substantial operational costs and risks.
A view held by some experts is that a CBDC could make quantitative easing more effective bypassing the banking sector, also as a substitute for bank deposits, strengthen the transmission of monetary policy changes to the economy. Such views assert that a CBDC need not be nearly as disruptive as the ECB maintain in its criticism of the concept.
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