ECB Executive Highlights Benefits of Digital Euro
Following plans by the European Central Bank (ECB) to issue a digital Euro, an executive member of the ECB’s board has emphasized on the benefits of a Digital Euro. According to the ECB’s President, Christine Lagarde, the release of the digital Euro would take four years or more. The European Bank plans to keep up with the cryptocurrency, hence, efforts to issue a central bank digital currency (CBDC)- a digital Euro.
Fabio Panetta, a member of the European Bank’s Executive board opined that the digital Euro would help in protecting the privacy of citizens and the sovereignty of the Euro. He further noted that the European bank is working assiduously to release the digital Euro to stop the soaring popularity of privately-issued cryptocurrencies like Bitcoin. Panetta dismissed claims that the ECB would have any untoward interest in the digital Euro. He said unlike firms working to create payment gateways built on the digital ledger technology, the ECB will not concern itself with users’ data when the digital Euro is issued.
Furthermore, Panetta said the ECB would, apart from assisting in protecting sensitive information of users, prevent the private firms from disrupting the current financial system. He said frequent testing will be conducted until the actual launch of the digital Euro as this would enable the keep sensitive information of users separate from the payment details. According to him, large scale transactions conducted with the digital Euro will be monitored to prevent money laundering or any other unlawful activity. However, he said small scale transactions by users will not be monitored.
More Countries Tending Towards a CBDC Stance
As more countries make efforts towards releasing their CBDCs, China is leading the pack with its Digital Yuan which it has implemented in some parts of the country. Moreover, China has been so critical of cryptocurrencies of late that it banned crypto mining activities in the country. Reports indicate the major worry of people all over the world about CBDCs is privacy which is one of the perks they enjoy with cryptocurrencies as they are decentralized.
A poll conducted by Morgan Stanley, an investment banking company, on the proposed digital Euro suggested the respondents of the poll were worried about other implications of the CBDC. According to the poll, other issues users were worried about are universality, additional costs, and security. Perhaps while efforts are being made to launch a CBDC, they would be able address these concerns.
ECB Considers Implication of Not Releasing a CBDC
The ECB had earlier considered the implications of not issuing a CBDC to rival privately-issued cryptocurrencies in a separate report. Few of the implications the European Bank had outlined in its reports are as follows- the threat privately owned digital currencies posed to the current financial systems wherein individuals and enterprises could be adversely affected; the CBDC would cement the status of the euro if it is adopted globally by other countries facing currency devaluation.
Other implications the Bank had considered are: local and cross-border payments would be controlled by foreign solution providers; the potential threat posed by the emergence of digital currencies created by renowned tech companies (Facebook’s Diem); the release of the CBDC would foster the hegemony of local payment systems and the adoption of the digital currency internationally.
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