ECB Sees Digital Euro as Useful for ‘All Citizens’

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In Brief
  • ECB President Christine Lagarde spoke about the digital euro at the ECB Governing Council meeting on Jan. 21.

  • A proper implementation would be useful for all people, not just the elites or young.

  • The ECB is taking steps toward a CBDC as technology - and the threat of foreign CBDCs - develops.

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ECB President Christine Lagarde pointed out that a digital euro is not only for just the elite, or the young.

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The European Central Bank (ECB) posted a tweet on Jan. 23 in which ECB President Christine Lagarde calls a properly-implemented digital euro “of service for all citizens”.

Lagarde made her statement at the ECB Governing Council meeting in Frankfurt am Main.

China Noted

Lagarde prefaced her statement about the overall utility of the digital euro by noting Central Bank Digital Currency (CBDC) usage elsewhere. In particular, she mentioned China’s ‘fairly large scale’ pilot program.

China’s digital yuan figures greatly in the ECB’s plans for a European CBDC. In November 2020, The ECB described its initial understanding of a European CDBC at the Future of Payments in Europe conference in Frankfurt am Main. ECZB Executive Board member Fabio Panetta claimed that the central bank wanted to ensure “efficient, inclusive and secure payments in the Digital Age”.

However, Panetta also talked about the twin threats of stablecoins and especially foreign CBDC. The bankers saw a foreign CBDC being used as a primary means of making payments by Europe’s citizens as a threat to the euro zone’s sovereignty. Moreover, these comments were made as China was rolling out the digital yuan into its domestic retail environment.

Should They Worry?

China’s digital currency plans do include international expansion. On Jan. 16, China’s Blockchain Service Network (BSN) announced its plans for 2021. BSN announced only blockchain expansion abroad.  Those ambitions include expanding BSN blockchain Public City Nodes in 50 cities in developed and developing countries.

At the same time, BSN is expecting to continue with enabling the digital yuan rollout in China. The ECB will be eyeing these twin developments with some concern, if the statements from November are an indication.

An American Way

The changes in the US federal government will set the course of development for an American CBDC for the next four years. At this point, the US is lagging both the euro zone and the Chinese.

Washington is in no hurry to catch up. On Thursday, Jan. 14, US Federal Reserve chair Jerome Powell told Yahoo Finance that creating a US CBDC is something to be done carefully. Powell also told Yahoo Finance that for as far as he is concerned, the US has a first-mover advantage because the dollar is the world’s reserve currency.

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James Hydzik is a finance and technology writer and editor based in Kyiv, Ukraine. He is especially interested in the development of regulation in the face of increasingly rapid technological change. He previously covered the CEE region for Financial Times banking and FDI magazines. An ardent believer in gut renovating eastern Europe one flat at a time, he currently holds more home renovation gear than crypto.

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