ECB’s Lagarde, Panetta See Digital Euro as More Efficient Payment Means Than Crypto – Finance Bitcoin News

In a new article, the European Central Bank’s top officers have highlighted that unbacked crypto currencies are inefficient as a means to pay and are susceptible to run-ins. The executives have marked key objectives for the project which should provide Europeans with “easy access to central bank money” in the digital era.

Senior ECB officials warn that the trend towards digital money creates risks

In an era of digital payments, financial stability requires that central bank money be available. According to Christine Lagarde, President of European Central Bank (ECB), and Fabio Panetta who are members of its executive committee, the digital euro could achieve this.

The high-ranking representatives of the eurozone’s monetary authority have thrown their support behind Europe’s central bank digital currency (CBDC) in a piece published this week in the bank’s blog, in which they note that the “successful model for payments” that lasted many decades is now challenged.

Private money is backed up by public money, which acts as an anchor. This ensures stability. “But payments are now undergoing a potentially disruptive transformation. People are increasingly paying digitally instead of with cash,” a trend towards convenience and opportunities, which also brings some risks, the co-authors elaborate.

With decreasing use of cash, public money could ultimately lose its role as the monetary anchor in Europe, and the euro — trust and international importance. Panetta and Lagarde argue that the absence of strong monetary stability in digital payments would cause confusion around what constitutes money.

You cannot convert one to one with the central bank’s money. They do not function well as a payment method, and are especially not efficient if the value of their currency is not supported by an asset. Stablecoins are also vulnerable to rans.

Then there’s the threat of a few providers dominating private sector solutions. It is possible for large tech companies to rapidly expand their customer base, increasing market abuse behavior. The fact that many of these firms are located outside of Europe could also lead to non-European participants dominating the European payments market.

It is important to keep the central bank’s money intact in digital age if we want to ensure a secure and reliable European payment system.

President and Board member of the ECB stress this was why they launched the digital currency project a year earlier. The introduction of a digital euro version would allow EU citizens to trust the digital monetary anchor that underpins their digital payments. It is hoped that this will protect European payments’ autonomy and increase efficiency in the overall payment system.

Panetta and Lagarde believe that the digital euro is widely accepted.

Fabio Panetta, Christine Lagarde, and Fabio Panetta believe that the digital Euro can succeed only when it’s integrated into everyday European life. The specific characteristics of its design are yet to be determined, as the CBDC’s investigation phase will take at least another year, but some key principles are already clear, they say.

Users would value ease-of-use, wide acceptance, low cost, speed, security and consumer protection as attributes. The digital euro would be welcomed by merchants who want to reduce costs, make it easy to use and integrate with other systems. The new incarnation of Europe’s common currency should also support the financial inclusion of those with limited access to digital payments.

Chiefs of the ECB insist that privacy should be treated with the highest standards. They think people should be able to choose how much information they want to disclose but there’s a condition — “so long as they comply with prevailing laws.”

Lagarde and Panetta warn that there are pitfalls. The Union’s financial authorities must ensure the use of the digital euro as a payment method and not an investment. They run the risk that too many commercial bank deposit moves to the central banking, which could cause tensions within the banking system.

The bankers recommend that safeguards be established from the beginning. Officials from the ECB conclude that a well-designed digital euro will help facilitate Europe’s transition to the digital age. Public financial authorities should focus on preserving integrity of the monetary, and payment system.

Is the digital currency going to meet Europe’s growing need for digital payments? Leave your comments below.

Lubomir Tatsev

Lubomir Tassev is a journalist from tech-savvy Eastern Europe who likes Hitchens’s quote: “Being a writer is what I am, rather than what I do.” Besides crypto, blockchain and fintech, international politics and economics are two other sources of inspiration.