ECB should be 'ahead of the curve' on digital currency: Lagarde
New European Central Bank (ECB) President Christine Lagarde addresses a news conference on the outcome of the meeting of the Governing Council next to ECB Vice-President Luis de Guindos, in Frankfurt, Germany, December 12, 2019.
At her first news conference at the helm of the ECB, Lagarde said the bank needed to decide what it wanted to achieve with the project before moving on to the technicalities.
“Are we trying to reduce costs? Are we trying to cut out the middleman? Are we trying have inclusive
finance at no cost? There is a whole range of objectives that can be pursued.”
Noting the interest shown by central banks in Canada, Britain and elsewhere, she said:
“My personal conviction is that given developments we see, not so much in bitcoin but in stablecoins projects... we’d better be ahead of the curve because there is clearly demand out there that we have to respond to.”
The ECB has been debating the pros and cons of introducing its own digital currency, which would give holders a direct claim on the central bank — just like with banknotes but without the inconvenience of storing large amounts of
A digital currency would give the public a cheap and fast means of payment but would also have huge repercussions for the financial system and the central bank’s own policy.
For instance, depositors would be likely to switch into the ECB currency at times of financial turmoil, potentially exacerbating any bank run.
On the upside, such a currency would allow the ECB to inject liquidity directly into the real economy if it wants to boost inflation, bypassing the financial sector and potentially making its policy more effective.
The debate about a central bank digital currency has been simmering in the background for years but it has gained fresh momentum since Facebook (FB.O) unveiled plans to launch its own private digital currency, called Libra, earlier this year.
The initiative has met with resistance from regulators across major jurisdictions, worried about the implications for money laundering and consumer protection, as well as their own grip on money creation.
EU finance ministers said earlier this month that private digital currencies should not be allowed in the bloc until the risks they could pose are clearly addressed.