The ECB must arm itself against "artificial currencies"
June 6, 2021 7:18 AM
For the European Central Bank, the digital euro can be imposed to ward off the threat of private sector currencies, described as artificial.
The specter of Facebook's Libra (renamed Diem) is receding. As a result, plans to issue central bank digital currencies are less urgent. In Europe, the launch of an e-euro could take 4 to 5 years, according to Christine Lagarde.
The threat of competition from sovereign currencies to private digital currencies has not entirely disappeared, however. Two economists from the European Central Bank, the ECB, recall this in a report.
The specter of tech giants' private currencies
In this document entitled "The international role of the euro", Massimo Ferrari and Arnaud Mehl thus address the concerns generated by the development of "artificial currencies". A term that can refer to cryptocurrencies, including stablecoins.
Competition from these currencies, issued by "foreign technological giants", must therefore be taken seriously, warn ECB experts. This is for several reasons, including their dominance over cross-border payments.
Protect financial stability and consumers
But in addition, "both individuals and traders would be vulnerable to a small number of dominant suppliers with strong market power," say ECB experts. How then might Europe react to such a threat?
According to Ferrari and Mehl, several scenarios could justify issuing a digital euro. A decision which would then become "important". The need to compete with the tech giants on payments is one such scenario.
“A CBDC could facilitate the digitization of information exchange in payments through electronic invoices, electronic receipts, electronic identity and electronic signature, which would allow intermediaries to offer higher value-added services. and technological content at a lower cost, ”they say.