The European Central Bank, on December 5th, published a paper in which the organization stated its position on the possibility of issuing a digital currency. According to the document, the ECB is open to the prospect of developing a digital version of the Euro, if the private sector cannot come up with a solution that speeds up, and lowers the cost of cross boarder payments.
The banking authority’s document, initially circulated internally prior to publishing, acknowledges the transformational impact that technologigical innovation has made on the retail payments sector – which includes the decline in the use of printed cash. The ECB aims to take an observational stance, monitoring the costs and benefits related to issuing a stablecoin, as well as the shortcoming of current payment systems in order to respond effectively, should it have to.
“In light of these developments, the ECB finds that the time has come to provide new impetus to European retail payments, building on past achievements such as the Single Euro Payments Area (SEPA). This impetus should be led by the industry, with support from the public sector where needed, mainly through the provision of core infrastructures and an adequate regulatory and oversight framework” – ECB
The document states that the ECB will also maintain watch over the transformational effect that fintech players have on the payments industry, with close focus being paid to the declining use of cash and explore strategies to adapt to the shifts in the payments landscape. The central bank intends to ensure that consumers can still make use of the Euro currency, if a time comes, where cash is no longer king.
“The ECB will also continue to assess the costs and benefits of issuing a central bank digital currency (CBDC) that could ensure that the general public will remain able to use central bank money even if the use of physical cash eventually declines. Prospects of central bank initiatives, however, should neither discourage nor crowd out private market-led solutions for fast and efficient retail payments in the euro area.” – ECB
The European Central Bank’s document, however, falls short of giving a definite timeline for the issuance of a digital currence. The central bank commits, instead, to providing private sector fintech players with regulatory frameworks and oversight as well as instruments to innovate. The ECB, industry efforts fall short of developing an innovative and efficient pan-European payment solution, the social need for it could potentially be met by issuing a CBDC. For instance, a CBDC with the status of legal tender could guarantee that all users have, in principle, access to a cheap and easy means of paymentaccording to the document, will only step in, in the event that the private sector fails to provide systems that make global payments faster and more cost effective.
“If industry efforts fall short of developing an innovative and efficient pan-European payment solution, the social need for it could potentially be met by issuing a CBDC. For instance, a CBDC with the status of legal tender could guarantee that all users have, in principle, access to a cheap and easy means of payment” – ECB
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