First modification: 07/15/2021 – 04:18
The growing demand of citizens for electronic means of payment and the rise of risky cryptocurrencies have led the world’s economic authorities to include a digital version of their currencies in their medium and long-term projects.
The European Central Bank (ECB) took a new step towards the possibility of introducing a digital version of the euro that complements effective use, as economic authorities around the world look at digital currencies with caution.
The ECB said in a statement on Wednesday, July 14, 2021, that the digital euro should be able to meet the needs of consumers and should not have an adverse impact on financial stability and monetary policy. However, a period of two years was given to verify it.
The analysis of a digital euro is long overdue, but accelerated after Facebook revealed plans to create its own currency in 2019 and following the apparent boom in cryptocurrencies such as Bitcoin, which is seen by some as a potential threat to the currency. core business of central banks.
“Our experimental work has already allowed us to identify possible ways to protect privacy. It has also shown that the energy needs of the infrastructure would be negligible compared to the energy consumption and the environmental footprint of crypto assets, such as Bitcoin, ”the entity explained on its Twitter account.
(THREAD) We have decided to launch a project to prepare for possibly issuing a digital euro. We will look at how a digital euro could be designed and distributed to everyone in the euro area, as well as the impact it would have https://t.co/KCf73qHOZ8 1/3 pic.twitter.com/eHvpFlH8sq
– European Central Bank (@ecb) July 14, 2021
Other countries such as China and Japan have already started pilot projects to determine the advisability of using digital currencies, while in others such as the United States the issue has become increasingly relevant in medium and long-term monetary policy plans.
How would a digital euro work?
The research project has just officially started and no great details are known about how a digital euro would work. However, it is believed that in essence it would be an electronic equivalent of banknotes and coins, through a digital wallet.
It probably resembles an online bank account that is managed directly by the citizens of the 19 euro zone countries at the ECB rather than at a commercial institution.
The ECB says the digital euro will complement but not replace cash, which accounted for 73% of all payments at points of sale in the euro zone in 2019, according to official data.
But authorities have become concerned that digital payments are largely handled through the private sector, as the use of physical cash begins to decline, as has happened in Sweden.
Today, the largest payment service providers in the euro zone, such as Visa and Mastercard, come from outside the EU bloc, raising concerns about the use that private companies make of transaction data.
In the best case, a digital euro could be used in five years. After two years of research and design, it must be approved by the Legislature and the ECB will work for another three years on its implementation.
With Reuters and AP