Eurozone warning as digital euro could be damaging and ‘highlight weaker economies’
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Before the pandemic, a central bank digital currency (CBDC) was seen as something exotic. Sweden’s Riksbank was alone among high-income countries in exploring it – a fact attributed to its population’s uniquely low use of cash. Now, official e-currencies have gone mainstream with almost every major player looking into it.
Last month, Kristalina Georgieva, the International Monetary Fund managing director, said that “after a long period of development, the field is on the cusp of major changes”.
Previously hesitant, the eurozone has also moved up to the front.
At the end of March, the European Central Bank published the responses to a completed public consultation.
This puts the ECB a step ahead of its major counterparts in engaging the public.
The UK government launched a “Britcoin” task force on Monday and the Bank of England has invited comments on a recent discussion paper.
In an exclusive interview with Express.co.uk, though, Martin Bamford, chartered financial planner at Informed Choice, warned it could be politically damaging for the monetary union.
He explained: “It would be a digital currency, alongside the euro.
“They have a currency system, which seems to work most of the time so I don’t think it would introduce any fresh problems.
“But it might amplify any sort of existing inefficiencies…”
Mr Bamford noted: “From a political perspective, if you have some stronger economy or a weaker one… it could highlight disparities.”
The ECB’s consultation, which was launched in October 2020, received over 8,200 responses.
The large majority of respondents were private citizens (94 percent), of which mostly men between 35 and 54 years old, while the other participants were professionals, including banks, payment service providers, merchants and tech companies.
Most responses came from Germany (47 percent), Italy (15 percent) and France (11 percent).
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The report shows that Europe’s citizens are in favour of a digital euro, but under a number of conditions.
The results show that citizens as well as professionals are in favour of such a development, provided that the digital euro respects privacy (43 percent) and confidentiality of transactions and that it is sufficiently secure (18 percent) to prevent fraud.
They also support requirements to avoid illicit activities with fewer than one in ten responses from members of the public showing support for full anonymity.
The ECB is not a fan of the most traded cryptocurrency: Bitcoin.
Its latest attack on the digital currency came last month, when one of the central bank’s executive board members, Frank Elderson, turned up his nose.
He wrote on Twitter: “Crypto-assets are volatile.
“They lack any intrinsic value and there is no reliable institution backing them.”
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At the beginning of January, the President of the ECB, Christine Lagarde, even announced she wanted to regulate cryptocurrencies.
Ms Lagarde argued the digital currency had been used for money laundering activities in some instances and that any loopholes needed to be closed.
She said in an interview at the Reuters Next conference: “Bitcoin is a highly speculative asset, which has conducted some funny business and some interesting and totally reprehensible money laundering activity.”
The cryptocurrency sector is still mostly lightly overseen or unregulated, although global standards on areas such as anti-money laundering (AML) have emerged.
Ms Lagarde joined a number of regulators from across the world in calling for implementing global rules for cryptocurrencies.
She added: “There has to be regulation.
“This has to be applied and agreed upon … at a global level because if there is an escape that escape will be used.”
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