The decentralized domestic currency has been making news lately following the uncertainty around crypto regulations. In more recent updates, European Central Bank is said to be considering the launch of its own digital currency if private financial players are unable to upgrade the cross-border payment system.
In essence, European Central Bank believes that the consumers are moving away from cash for payments, which urged ECB to dig deeper into the possible alternative to ensure the general public still holds and uses central bank money. As a result, ECB is considering accelerating its plan to develop Central Bank Digital Currency (CBDC) for citizens, especially when the “use of physical cash declines.” The Central Bank asserts that;
“A future decline in cash usage could be a catalyst in accelerating central bank efforts in the area of CBDC.”
This update was first reported by Bloomberg that claimed to have obtained an internal document of ECB. According to Bloomberg, ECB stressed about the decline in the use of cash in payment and analyzed the need for a “ready-solution” to respond when required. ECB further laid down the emphasizes of issuing a CBDC if industry efforts fail to innovate payment solutions in Europe.
According to the document;
“A CBDC with the status of legal tender could guarantee that all users have, in principle, access to a cheap and easy means of payment.”
Interestingly, the reasoning put forth in the wake of a significant transformation of several European countries from cash towards some form of digital payments. However, ECB isn’t the first country to consider CBDC as the alternate solution, China, for example, is another country that is leading the wave of decentralization and blockchain technology.
Nevertheless, yet another reason behind ECB considering CBDC is that the progress on retail payments across Europe has reportedly been plodding. A similar point was also echoed by Benoit Coeure, an outgoing executive board member of ECB – Coeure remarked that the “European payment market remained fragmented despite the recent launch of internal TIPS instant settlement system.”
In a nutshell, it should be noted that the European Central bank hasn’t officially discussed its plan to develop CBDC. Instead, Bloomberg managed to obtain access to the bank’s internal document. More so, the document only hints the CBDC as a substitute whenever the need arises in the future.
Hence we suggest you take it with a pinch of salt!
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