According to President Christine Lagarde, the European Central Bank wants to play an active role in the cryptocurrency field. However, as the bank develops its own cryptocurrency and an instant payment system, Lagarde emphasized that “central bank initiatives should neither discourage nor crowd out private market-led solutions for fast and efficient retail payments in the euro area.”
Moreover, during an interview, Lagarde revealed that the ECB wants to play an active role in the field rather than act as an observer in a changing world. She noted the ECB will keep tabs into the “feasibility and merits of a central bank digital currency [CBDC].”
According to past reports, Lagarde said the ECB should be “ahead of the curve” when it comes to stablecoins. She added that there is “clearly demand out there that we have to respond to.” In her latest interview, however, Lagarde claims the ECB shouldn’t “discourage” private stablecoins.
“The prospect of central bank initiatives should neither discourage nor crowd out private market-led solutions for fast and efficient retail payments in the euro area.”
CBDC Could Have Significant Impact on the Financial System
In addition, the ECB chief added that a central bank digital currency could have big implications on the financial system. She claimed it could change the way monetary policy is transmitted, rendering commercial banks redundant. This is because people would be able to directly open accounts with the European Central Bank.
Nevertheless, the ECB is considering developing its own CBDC if the private sector fails to come up with an efficient cross-border payment solution; and if usage of fiat drops in Europe. In addition, the Eurozone currently has an ECB pegged project for real-time payments dubbed TIPS. However, it has been met with great caution by commercial banks.
In conclusion, fiat is currently still popular as a means of payment in Europe. In the past ECB has revealed if there are “signs of a future decline in cash usage;” that could “be a catalyst in accelerating central bank efforts in the area of central bank digital currency.”