The European
Central Bank (ECB) could begin seriously considering and studying the
digital euro by mid-2021, the bank said in a report released Oct. 2. 

The report
examined how a digital euro may impact retail payments and how it can
protect payments in the future. It also looks at how virtual currencies
could fit within the landscape of the entire Eurosystem. However, it
does not specify what model the ECB should take when and if it designs
its digital currency. 

Based on the report, the ECB may start a
virtual currency program “to ensure meaningful answers are obtained to
the open questions raised” by the middle of next year, possibly with an
investigation phase to develop the digital euro and conduct experiments.
It added that before issuance can be discussed, the ECB needs to
consider the various stakeholders’ views.

The report noted digital currencies could bring more financial accessibility: 

“The
possible advantages of a digital euro and the rapid changes in the
retail payment landscape imply that the Eurosystem needs to be equipped
to issue it in the future. A digital euro could support the Eurosystem’s
objectives by providing citizens with access to a safe form of money in
the fast-changing digital world. This would support Europe’s drive
towards continued innovation. It would also contribute to its strategic
autonomy by providing an alternative to foreign payment providers for
fast and efficient payments in Europe and beyond.” 

The
ECB said there are several requirements that a digital euro must meet
if it is created. The first is that it must keep pace with technology
and be made available “through standard interoperable front-end
solutions throughout the entire euro area and be interoperable with
private payment solutions.” Second, it should match distinctive features
of cash, be easy for everyone to use, be free of charge, and protect
privacy. The digital euro must also have functionalities “that are at
least as attractive as those payment solutions available in foreign
currencies or through unregulated entities” and must be a tool to
improve monetary policy transmission. It should also be widely available
through resilient channels separate from other payment services and can
withstand extreme events like a global pandemic. 

The ECB said
the digital euro must also be available outside the Eurozone, be
cost-saving and its design be environmentally friendly, meaning it
should be based on technology that minimizes ecological footprints. 

For
the ECB, a digital euro must be designed to avoid being used as a means
for investment, or even be considered a cryptocurrency or a stablecoin.
But rather be used primarily as a form of payment to avoid fluctuations
in price:

“Given the risks for monetary policy
transmission and financial stability, it is not desirable for the
digital euro to attract very large investment inflows. However,
if individual holdings of digital euro were too low, either because of
rigid constraints or because of disincentives applied above a relatively
low threshold, then the digital euro would be less attractive as a
means of payment and less competitive than alternative instruments.”

The
report also discussed various technical and organizational models if
the digital euro is to be launched. While the report is comprehensive,
the ECB stressed it wants to create discussion around digital currencies
with other stakeholders. It does not set out specific methods for how
the digital euro can be distributed. 

ECB President Christine Lagarde said on Sept. 10 that the Eurosystem has not yet made a decision to release the digital euro or not, though Lagarde has been supportive of it and emphasized it will not replace fiat.

source link : https://cointelegraph.com/news/ecb-to-consider-further-digital-euro-study-in-2021