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Second largest reserve currency going digital? European Central Bank: We must be prepared to launch when necessary

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Second largest reserve currency going digital? European Central Bank: We must be prepared to launch when necessary

The President of the European Central Bank (ECB), Christine Lagarde, summarized her achievements since taking office in 2020 on Twitter yesterday, January 1st. She specifically mentioned the digitalization of the Euro and publicly sought feedback from the public. In fact, the ECB has repeatedly emphasized their interest in a digital Euro.

What Did the President of the European Central Bank Say?

Reflecting on the past year, Christine Lagarde stated that the exploration of introducing a digital euro is already underway. As Europeans shift towards digital payments, savings, and investments, it is crucial to be prepared for a digital euro and to provide a consultation form for feedback. Form.

In a video message, Christine Lagarde mentioned that discussions about the digital euro are still in the review and consideration phase. The public consultation has just been launched to gather opinions from consumers and Europeans on this matter. The aim is to understand if Europeans would be willing to use the digital euro as they do with physical cash, knowing that it is a digital currency issued by the central bank and is trustworthy.

European Central Bank Distinguishes Digital Euro from Cryptocurrencies

In early October, the European Central Bank already introduced a page and report on the digital euro, stating that with technological advancements, the digital euro could provide a globally accepted, risk-free, and trustworthy payment method to complement the shortage of cash. Similar to China's stance, the digital euro is not intended to replace cash but rather to supplement its functions.

The ECB explained in a 55-page report the potential benefits and challenges, emphasizing that the digital euro is neither a "cryptocurrency" nor a "stablecoin." The ECB believes that cryptocurrencies are highly volatile, lack intrinsic value, and do not have a reliable organization backing them, making them different from currencies issued by central banks. Additionally, the application of cryptocurrencies is limited to certain investors, which may lead to liquidity issues, preventing investors from converting back to the initially invested fiat currency.

The ECB stated that even though stablecoins are issued using distributed ledger technology, they may evolve to be similar to commercial bank money, e-money, investment funds, or cryptocurrencies based on changes in technological forms. The purpose of all stablecoins is to maintain value stability over time. However, the ECB asserts that only the digital euro can truly guarantee this.