European Central Bank (ECB) President Christine Lagarde has suggested that the Eurozone could benefit from adopting the ‘digital euro’ as the EU’s post-pandemic recovery kicks into gear. The ex-IMF President made the comments while addressing the Franco-German Parliamentary Assembly in Frankfurt on Sept 21.
According to Lagarde, the Digital Euro should not be viewed as a replacement, but rather a complement to cash. In a nod to cryptocurrency, she also stated that adopting a digital euro could serve as an alternative to private digital currencies.
Lagarde’s Remarks on Digital Euro
Founded in 2019, the Franco-German Parliamentary Assembly is a bilateral assembly made up of 50 members of Germany’s Bundestag and 50 members of France’s Assemblée Nationale. Appearing before the assembly for the first time, Lagarde spoke at length on the need to adopt new digital technologies in the world’s largest common currency zone.
According to Lagarde, digitalizing the EU economy will not only aid the post-coronavirus recovery but would also position the bloc for long term prosperity and autonomy. Specifically speaking about the possibility of adopting a pan-EU Central Bank Digital Currency (CBDC), she said:
“In a more digital economy, we also need to ensure the strength and autonomy of European payment systems. The Eurosystem is actively pursuing initiatives to achieve this. We are also exploring the benefits, risks and operational challenges of introducing a digital euro. A digital euro could be a complement to, not a substitute for, cash; it could provide an alternative to private digital currencies and ensure that sovereign money remains at the core of European payment systems.”
Lagarde’s position is in line with an existing European school of thought which argues that the proposed CBDC would not compete with the euro, but would coexist and interoperate with conventional banking infrastructure. Under the mooted framework, the diffusion of financial power away from a few strong banks would come with fiscal and competitive advantages as banks are forced to make better decisions.
EU to create ‘superbody’ of watchdogs to oversee digital currencies— Luxembourg House of Financial Technology (@The_LHoFT) September 18, 2020
"I believe that Europe is in a position to lead the way on regulation." – @VDombrovskis
https://t.co/Djdg9gJ53f#Fintech #DigitalCurrency #Blockchain #CBDC #Banking pic.twitter.com/wF4G5UhCY9
Europe and Digital Currencies in 2020
Last week, BeInCrypto reported that the European Union proposed a four-year window for incorporating cryptocurrency assets into its payment infrastructure. Documents from the European Commission (EC) revealed that the body saw the recent pandemic lockdowns as proof that Europe needs to move away from its cash-dominated status quo.
Like Lagarde’s remarks in Frankfurt, the EC documents repeatedly mentioned autonomy as a key concern in building out a new European digital payment infrastructure. This came after a consortium of 16 European banks previously announced a partnership for a homegrown European payment system tentatively set to go into operation by 2022.