An ECB digital currency can be a reality soon. Speaking to Challenges, a French corporate magazine, Christine Lagarde of the European Central Bank said that the bank is studying the feasibility and advantages of a state-backed cryptocurrency. Also, she said that the organization is excited to see positive developments and growth of the virtual currencies especially the central bank digital currencies (CBDC) by various other nations.
Christine Lagarde further mentions that the growth of CBDCs in no way symbolizes that private players can’t reap any benefits. In fact, she encouraged the efforts of private players in developing and supporting upcoming CBDCs. As global transactions and cross-border payments increase dramatically, ECB would strive to research more into the CBDC realm.
ECB digital currency will require extensive collaborations
Lagarde has always held a positive sentiment for CBDCs. She mentions how the ECB is ahead of its counterparts in crypto regulation matters. At the same time, the bank doesn’t disapprove of the other cryptocurrencies that operate in the open market. The global financial realm must include private and public sector alternatives. A CBDC must not be seen negatively by other virtual currencies but rather as a healthy competition that will help in the mainstream adoption of cryptocurrencies.
An ECB digital currency will have broader implications for the member countries. The monetary mechanisms of the bloc will undergo extensive policy changes to adapt to a CBDC. Recently, the ECB created a dedicated team to understand the dynamics of a CBDC and work out the modalities of a Eurozone CBDC.
Rising global interest in CBDCs
Ever since the Chinese digital Yuan and Facebook’s Libra were announced, every global central bank has started studying cryptocurrencies. Naturally, both these upcoming virtual currencies pose a lot of challenges to the global financial system. It is apt for global banks to respond by developing their respective virtual currencies.
State-backed digital currencies have their own merits and demerits depending on many other factors. It can provide citizens more leeway in retail, enhanced security and more transparency in day-to-day operations. Most CBDCs, like an ECB digital currency, will work alongside the current fiat currency system.
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