Lagarde and Panetta from the ECB believe that cryptocurrency is not the most efficient form of payment.
Senior officials of the European Central Bank have noted in a new document on the development of the digital euro that unsecured digital currencies are not effective means of payment and stable currencies are vulnerable to coercion. Leaders outlined key goals of the plan for Europeans to have “easier access to central bank money” in the digital age. As transactions become digital, maintaining access to central bank money is critical for financial stability. According to the president of the European Central Bank (ECB) Christine Lagarde and the member of the Executive Board Fabio Panetta, the digital euro can achieve this. Eurozone senior monetary authorities have backed the European Central Bank’s (CBDC) digital currency in a blog post this week. Now comes the challenge.
The stability of the current model is based on private money backed by public money that acts as an anchor. “But payments are now undergoing disruptive changes,” the co-authors explain. “People are increasingly paying digitally instead of cash,” a trend toward convenience and opportunity that also carries risks. As the use of cash decreases, sovereign money will eventually lose its monetary peg in Europe and the euro its international credibility and importance. Lagarde and Panetta say a digital payment ecosystem without a strong monetary anchor create confusion about the value of money, citing cryptocurrencies as an example.
There is a risk that some providers will dominate private sector solutions. Large technology companies can use their large customer bases to quickly spread and increase the risk of market abuse, and the fact that most of them are located outside the EU could lead to non-EU players dominating the European payment market. Bankers are cautious and under pressure. Bankers say safeguards should be in place from the start. A carefully designed digital euro will help Europe’s society and economy move into the digital age while public financial authorities focus on protecting the integrity of the currency and payment systems, European Central Bank officials concluded.