The decision to launch a digital euro will be made in the next few months, but the actual issuance of such a currency could take years. This was stated by the head of the European Central Bank Christine Lagarde.
The ECB President confirmed in an interview with Bloomberg news agency that the entire process of developing a central bank digital currency (CBDC) could take at least four years. At the same time, the Bank plans by “mid-2021” to make a decision on whether to deal with this initiative at all. Let’s talk about the situation in more detail.
The CBDC is the digital version of the regular currency (in this case the euro) that is backed by the central bank. Countries around the world are currently exploring the benefits of developing this type of asset, with China leading the way.
Digital national currencies will require less costs for creation and maintenance, because in this case there will be no paper for printing. In addition, they are unlikely to be forged, since the monetary network will be controlled by the main banks of the country.
However, each such product must be very large-scale. In this regard, the development and full launch of digital national currencies takes time.
When will the digital euro appear?
Judging by Lagarde’s words, market players should not build too optimistic expectations about the timing of the CBDC issue, even if the digital euro project is supported by the ECB leadership. Here is her remark, in which the expert shares the details of what is happening. The cue is from Decrypt.
But the whole process, let’s be realistic, in my opinion, will take another four years. Maybe a little more, but I hope we can keep the development progress for four years, because this is both a major technical challenge and also a fundamental change in the global economy.
Here is a transcript of a conversation with a representative of the European Central Bank. We recommend that you watch if you understand English by ear.
Lagarde added that the ECB will soon decide whether or not the CBDC is worth issuing. After all, the mid-2021 target is only three months away. If legislators give the green light, then technology development work will begin. Lagarde continues.
We have to make sure we do it right. We are indebted to the Europeans. They need to feel safe. They need to feel like they are holding a digital banknote backed by a central bank.
Lagarde said last year that the digital euro might be a good idea, as it could supplement cash and possibly create new jobs.
However, her recent comments show that Europe’s central bank is lagging behind other major economies. China, for example, is significantly ahead of its potential rivals in the new game: back in October, the People’s Bank of China made more than three million payments in digital yuan.
The ECB and the US Federal Reserve seem to be acting more cautiously. Earlier, Federal Reserve Chairman Jerome Powell said that the US central bank is in no rush with CBDC and is not “in decision-making mode at the moment.”
At the same time, it is likely that an overly cautious strategy regarding digital assets could cost many countries the primacy in the economy of the future. And if CBDCs really go mainstream, China could dramatically accelerate its economy thanks to the digital yuan.
The first successes of the PRC are already amazing. On the eve, China completed its first cross-border digital yuan development pilot projects with Hong Kong, Cointelegraph reports. Wang Xin, director of the research bureau of the People’s Bank of China, said that the Hong Kong Monetary Authority and the People’s Bank of China have conducted technical trials of the cross-border use of CBDCs.
The news came shortly after the head of the People’s Bank of China’s Digital Currency Research Institute, Mu Changchun, proposed the creation of a global CBDC regulatory infrastructure last week. Speaking at a Bank for International Settlements seminar, Mu called on global financial institutions to ensure global interoperability of national digital currencies. Here is his line.
Interoperability should be provided between CBDC systems of different jurisdictions and exchanges. The NBK shared proposals with other central banks and monetary authorities.
Given the transience of trends in the global economy and the crypto market, CBDCs may well find huge publicity around the world in the years to come. If this happens, the Chinese will be the first in this matter. Therefore, it is possible that all other countries will start equal to the digital yuan project.
We believe that the topic of digital national currencies will become one of the main trends for the central banks of various countries. Still, cryptocurrencies and the field of decentralized finance are showing incredible rates of development. And if bankers take their time and offer interesting innovations, the prospects for coins on the blockchain will be even more obvious to ordinary citizens.