christine lagarde

ECB President Lagarde: Digital Euro CBDC Will Complement Not Substitute Cash

Christine Lagarde, President of the European Central Bank (ECB), said that a CBDC or digital euro would most likely work in tandem with fiat currency, not replace it.

The central bank digital currency (CBDC) being developed by the European Union will most likely not fully replace the euro according to ECB President Christine Lagarde.

“A digital euro could be a complement to, not a substitute for cash,” said Lagarde speaking at a virtual meeting of the Franco-German Parliamentary Assembly on Sept. 21. Lagarde said that while the ECB was exploring and assessing the risks of a CBDC, it was unlikely it would ever fully replace fiat currency.

Lagarde said:

“It could provide an alternative to private digital currencies and ensure that sovereign money remains at the core of European payment systems.”

On Sept.10, during an online conference with the Deutsche Bundesbank, President Lagarde said that consumer preferences have seen an increase in digital contactless payments, with Europeans taking to online platforms for their retail needs during the pandemic. With the digital revolution at our footsteps, “more than four in five Europeans regularly use the internet, up from one in five two decades ago,” said Lagarde. Global payments have been increasingly on the surge, as the pandemic has driven the digitization trend forward.

The ECB President also said that a taskforce to study the risks and potential effects of a CBDC would be announced this month, but that the European Union had not reached consensus on the introduction of a digital euro.

Euro Money Printer Goes Brrr

On Sept 10, the European Central Bank also announced it would not alter its interest rates and COVID-19 stimulus programs despite a strong euro—which Bitcoin billionaire Tyler Winklevoss called a “powerful advertisement for Bitcoin.”

The ECB stimulus money printing and interest-free lending to businesses appears set to continue as it announced it would not be making any immediate changes to raise inflation or to alter its Pandemic relief program which remains at a total of 1.35 trillion euros.

Bitcoin billionaire Tyler Winklevoss was extremely critical of the ECB’s announcement—to continue to keep refinancing operations, marginal lending facility and deposit facility unchanged at 0.00%, 0.25% and -0.50%, respectively.

Winklevoss said:

“The European Central Bank’s refinancing rate is 0% and its deposit rate is -.5%. This means it is free to borrow money, but actually costs you money to save. Thinking face This is both a potent recipe for inflation and powerful advertisement for #Bitcoin.”

European Central Bank is Consulting the Public on CBDC

The European Central Bank is keen on its drive towards a Central Bank Digital Currency (CBDC) and launched a public consultation yesterday, seeking public opinion on the proposed Digital Euro.

According to the European Central Bank (ECB), the proposed digital euro is different from a “crypto-asset” and all implications of issuing the CBDC must be adequately considered. The public consultation officially launched on Oct. 12.

The European Central Bank has undoubtedly been making crucial moves towards the issuance of a Digital Euro in the past days. “A digital euro could support the Eurosystem’s objectives by providing citizens with access to a safe form of money in the fast-changing digital world. This would support Europe’s drive towards continued innovation,” the ECB said in an earlier report in which it assessed the potential of issuing the digital euro, “It would also contribute to its strategic autonomy by providing an alternative to foreign payment providers for fast and efficient payments in Europe and beyond.”

From the foregoing, the ECB’s current plan for the public consultation involves devising ways to ensure that the proposed Digital Euro will be ‘risk-free’ like banknotes and coins. According to the report, the ECB beginning on October 12 will start a three-month public consultation and a series of experiments that will span over six months.

No Timeline Yet Set For The Issuance

Despite the ECB’s growing impetus towards achieving a Digital Euro, the apex bank has not released any timeline to guide the process of the development and subsequent issuance. The resurgence in the ECB’s plan was partly due to the acknowledgment that the coronavirus pandemic has accelerated digital currency adoption.

In a bid to consolidate the traction the ECB is gaining in line with its CBDC project, about six European Nations have formed a working group to further assess central bank digital currencies. In all, the ECB’s overall aim is to launch the digital Euro in time to unleash the global power of the Euro.

ECB to Meet the Growing Demand for Digital Payments with a CBDC Digital Euro

Christine Lagarde, the President of the European Central Bank (ECB), once again broached the topic of central bank digital currency (CBDC) issuance and why the bank was seriously considering the creation of a digital euro.

What ECB wants to achieve with CBDC

In an interview with local news outlet Le Monde, Christine Lagarde discussed how the coronavirus pandemic drastically changed the economic landscape worldwide. She broached the topic of a digital euro and announced the central bank’s intentions for it. European Central Bank has been driving forward their quest for a CBDC, beginning its experiments by recently launching a public consultation system to get a public opinion of the proposed digital euro.

President Lagarde said:

“It’s simply a matter of making our currency fit for the digital age. When we see how quickly digital payments are spreading, especially among young people, it’s important to meet this demand.”

The former chair of the International Monetary Fund (IMF) emphasized once again that if a digital euro was to be issued, it would complement fiat, rather than replace it. She also clarified on what the European Central Bank hoped to accomplish with a digital currency issuance. She explained:

“If we can have a means of payment that is more efficient, costs less, causes less pollution, can be used as easily as cash, protects privacy while ensuring traceability, reduces the cost of transferring money between countries and strengthens the international role of the euro, we would be remiss not to study it!”

ECB plans for a potential CBDC issuance

The European Central Bank, under Lagarde’s direction, has been thoroughly assessing whether to create a central bank digital currency that could be used in the Euro Zone as well as in other countries. Through a report, it announced that if the project was cleared by European financial authorities, the research and development phase of the digital euro may start sometime in mid-2021. The financial project will be led by the High-Level Task Force on CBDC.

Several criteria were listed by the ECB, to be considered before the launch of a digital euro. The launch of a digital euro by the central bank may be inevitable, especially if other countries progress forward with their CBDC plans and ECB wishes to stay competitive on a global scale. The October report read:

“A digital euro could support the Eurosystem’s objectives by providing citizens with access to a safe form of money in the fast-changing digital world. It would also contribute to its strategic autonomy by providing an alternative to foreign payment providers for fast and efficient payments in Europe and beyond.”

Currently, China appears to be in the lead for potentially finalizing an official central bank digital currency. It has been reported that the country has been actively testing out its pilot version of a CBDC, dubbed digital currency electronic payment (DCEP).

Deutsche Bank Executive Says CBDC is More of a Political Decision

Deutsche Bundesbank Executive in charge of payments, Burkhard Balz has weighed in on the surging strides of the European Central Bank to debut a Central Bank Digital Currency and reasoned that such decisions as it relates to individual countries around the world may be more of a political one than a technical one.

Speaking at a virtual conference of the China Europe Finance Summit – A Hybrid Conference on Sino-European Capital Markets, Balz noted that the CBDC pursuit is political and the overall impact of such a venture on the society must be considered.

The Deutsche Bank Executive said:

“Introducing CBDC is a political decision rather than a technical decision. Therefore, a comprehensive conceptual analysis and assessment of CBDC relative to alternative options is necessary – especially in terms of the fulfillment of our mandate, but also regarding its impact on society as a whole.”

Balz gave a series of assessments and action points every country must perfect before making a CBDC available and reiterated that in the case of the E.U and Germany, the European Central Bank (ECB) may implement a cap on the total number of Digital Euro anyone can hold in order to prevent a Digital Bank Run in which users may convert cash into the equivalent digital currency which may offset the entire financial system.

Balz also advocated the debut of Stablecoins due to their potentials as the ECB is championing.

Digital Euro Drive

The European Central Bank has been more upbeat about its intentions to debut a unifying digital currency for members in the Eurozone. President of the ECB Christine Lagarde broached the topic of CBDC issuance recently and reiterated why the bank is seriously considering the creation of a digital euro which is to meet the growing demand for digital payments across the bloc.

The Digital Euro drive has sparked increased preparation from the regional banks within the region including the Italian Banking Association, Associazione Bancaria Italiana (ABI) and the ECB has recently begun a public consultation as part of the process of developing of the digital euro.

Do Europeans Want a Decentralized Digital Euro? Asks ECB Survey

Do Europeans want a decentralized digital euro that does not rely on the central bank or a trusted central intermediary?

The European Central Bank is asking for public opinion with a new survey on the potential and public sentiment of a decentralized digital euro.

On Nov 1, Christine Lagarde, the President of the European Central Bank (ECB) launched a public consultation survey to gather citizen’s thoughts and feedback on the potential of a digital euro.

In a Tweet, ECB President Lagarde posted a link to the survey and said:

“We’ve started exploring the possibility of launching a digital euro. As Europeans are increasingly turning to digital in the ways they spend, save and invest, we should be prepared to issue a digital euro, if needed. I’m also keen to hear your views on it.”

The ECB President’s tweeted survey asks respondents to rank their preferences for a digital euro including what the public would expect for a CBDC in terms of services, functionalities and use cases.

In a follow-up Tweet, Lagarde posted a video and highlighted that through the survey:

“Europeans can actually express their preference and tell us whether they would be happy to use a digital euro just in the way they use a euro coin or a euro banknote, knowing that it is central bank money that is available and that they can rely upon.”

Centralized or Decentralized

The Euro Central Bank’s public consultation survey asks European’s to rank their preference for the digital euro to be decentralized or controlled by the Central bank.

The survey outlines that there are two approaches that can be taken to make a digital euro work—”one that requires intermediaries to process the payment and one that doesn’t.”

In the most likely issuance of the digital euro, it is expected that the central bank or trusted financial intermediaries would be responsible for the record the transactions.

The other method that the ECB describes for digital euro governance is decentralized, meaning it has no need for the European central bank or an “intermediary to be involved in the processing of every single payment.”

The ECB explains that a decentralized version of the digital euro would “feel closer to cash payments, but in digital form – you would be able to use the digital euro even when not connected to the internet, and your privacy and personal data would be better protected.”

This is an interesting and surprising approach by the ECB, and would bring the digital euro closer to cryptocurrency like Bitcoin, which was essentially built to end the reliance of the financial system on central banks.

While central bank digital currencies will have the speed and practicality of cryptocurrency, opposition to crypto is fundamentally why CBDC will soon exist and philosophically they are the antithesis of everything that Bitcoin was created for—to escape the constraints of a broken financial system, empower individuals with financial autonomy, and to bring transparency and trust to finance.

Stablecoins Could Threaten Monetary Sovereignty and Financial Stability, Says ECB’s Christine Lagarde

Christine Lagarde, the president of the European Central Bank (ECB), has stipulated that innovations like distributed ledger technology (DLT) and blockchain present both new opportunities and risks for the future of money. She highlighted that stablecoins could pose serious dangers, which could threaten monetary sovereignty and financial stability.

Cryptoassets are highly speculative and volatile

Lagarde threw criticism at crypto-assets for not being in a position to maintain a stable value because they are highly speculative, illiquid, and volatile. As a result, they do not adhere to the full functions of money.

The ECB president said in a statement on Nov 30, that stablecoins have the potential of driving additional innovation in payments and be integrated into trade, social media, and other platforms. Lagarde cautioned:

“If widely adopted, they could threaten financial stability and monetary sovereignty. For instance, if the issuer cannot guarantee a fixed value or if they are perceived as being incapable of absorbing losses, a run could occur.”

By using stablecoins as a store of value, Lagarde believes this could trigger a paradigm shift of bank deposits to these digital assets. This could distort the transmission of monetary policy and banks’ operations.

The rollout of a Digital Euro

Lagarde also delved into the issue of the digital euro, viewing it as a game-changer in the modern era. She noted:

“A digital euro would complement cash and ensure that consumers continue to have unrestricted access to central bank money in a form that meets their evolving digital payment needs.”

The ECB president acknowledged that the issuance of a digital euro could be pivotal in ensuring the continued access to monetary sovereignty and central bank money.

Her praises for the digital euro comes at a time when the German Finance Minister, Olaf Scholz, recently called for speedy interventions in the rollout of this digital currency because it can be an ideal instrument to fill the void triggered by a high demand for digital money from businesses and consumers in Europe.

Bitcoin Will Not Likely Be Held by Central Banks in the Future, Says ECB President Christine Lagarde

Christine Lagarde, the President of the European Central Bank said that it was “very unlikely” that central banks would hold Bitcoin. During a conference call hosted by The Economist, Lagarde said: “It’s very unlikely – I would say it’s out of the question.”

The European Central Bank President does not regard Bitcoin to be a real currency and revealed that central banks would not be holding it as reserve currency anytime soon.

Lagarde, however, noted that central banks are embracing and considering the issuance of central bank digital currencies, thanks to the coronavirus pandemic that has pushed economies toward faster adoption of digital innovation. She revealed that the European Central Bank is poised to launch a digital euro currency within the next four years.

Her comments came as part of a wide range of discussions about economic recovery as the globe slowly recovers from the COVID-19 pandemic.

Lagarde has been enthusiastic about a central bank digital currency (CBDC). In the past, the European Central Bank President stated that a digital euro currency could be vital and could lead to the creation of new jobs. The European central bank has been heavily doing research on a CBDC and is planning on presenting its findings to the public for feedback.

Questioning the Role of Bitcoin

While Lagarde has been skeptical of Bitcoin, she has been publicly endorsing and promoting CBDC. She previously stated that a CBDC should complement, but not replace traditional cash. She even said that a central bank digital currency could “provide an alternative to private digital currencies” like Ether and Bitcoin.

Her criticisms toward Bitcoin seem to have taken a new shape. In December last year, Lagarde stated that private cryptocurrencies “posed risks” and added that Bitcoin did not “fulfill all the functions of money.” She also stated that private stablecoins also pose serious risks.

Recently, last month, she called for more regulations on Bitcoin, stating that the digital currency has been utilized for some “funny business” such as money laundering.

ECB to Announce by Mid-2021 Whether It Will Move Forward with CBDC Issuance

European Central Bank (ECB) President Christine Lagarde said that a decision on whether or not to launch a CBDC will be made by the middle of this year.

However, after deciding whether or not to go forward with a digital Euro issuance, the actual development of the central bank digital currency (CBDC) will take at least another four years, the Central Bank President said. Speaking to Bloomberg, Lagarde said:

“But the whole process – let’s be realistic about it – will in my view take another four years. Maybe a little more, but I would hope that we could keep it within four years because it’s a technical endeavour as well as a fundamental change.”

Lagarde asserted that a decision on whether to move forward with a CBDC issuance will be finalized by “mid-2021.” She said:

“We need to make sure that we do it right. We owe it to the Europeans. They need to feel safe and secure. They need to feel that they are holding a cenral bank-backed digital bank note.”

Previously, Lagarde said that a digital euro would complement cash, rather than act as a substitute. Consumer preferences have seen an increase in digital contactless payments with Europeans taking to online platforms for their retail needs during the pandemic. The European Central Bank has therefore evaluated a potential CBDC issuance to remain competitive amid the digital wave.

With the digital revolution at our footsteps, “more than four in five Europeans regularly use the internet, up from one in five two decades ago,” said Lagarde. Global payments have been increasingly on the surge, as the pandemic has driven the digitization trend forward.

CBDCs across major economies

Despite discussing the potential issuance of a digital euro, Lagarde has taken a more cautious approach to CBDCs, much like the US Federal Reserve. Fed Reserve Chairman Jerome Powell had previously said that the bank will not cut any corners when studying the digital dollar. He asserted that the goal was not to be the first to deploy a central bank digital currency – rather, it was to issue it in the right way by researching CBDCs thoroughly before moving forward with a release.

China has taken another approach. Last year, the People’s Bank of China had already began piloting their digital currency electronic payment (DCEP) in major cities in China. Additionally, a $1.5 million giveaway of the digital yuen was held in the city of Shenzhen.

ECB President Christine Lagarde Says Crypto is "Worth Nothing"

Christine Lagarde, the President of the European Central Bank (ECB) has re-emphasized her dislike for the digital currency ecosystem, noting that the nascent asset class is highly speculative, risky, and worth nothing.

As reported by Politico, Lagarde shared how she felt about digital currencies in an interview with the Dutch TV show, College Tour, on schedule to be aired this Sunday. In her words;

“I have said all along the crypto assets are highly speculative, very risky assets,” Lagarde said adding, “My very humble assessment is that it is worth nothing. It is based on nothing, there is no underlying assets to act as an anchor of safety.”

The veteran financial expert said she has never invested in any digital currency, a declaration that does not come as a surprise considering other experts in both banking and finance also maintain a similar claim. However, Lagarde confessed that her son had invested in crypto, and came down with little luck.

While slamming cryptocurrencies, Lagarde says the emergence of a Digital Euro, the bloc’s Central Bank Digital Currency (CBDC) will receive her full endorsement seeing it will be backed by the ECB.

“The day when we have the central bank digital currency, any digital euro, I will guarantee it,” she said. “So the central bank will be behind it. I think that is vastly different from any of those things.”

In a manner that is characteristic of senior banking executives, the scorn for cryptocurrencies on the path of Christine Lagarde was more forthcoming. For regulators in the United States like the Securities and Exchange Commission (SEC) chair, Gary Gensler, identifying the subtle distinction in his love for crypto is arduous seeing he has approved a BTC futures-based ETF but has refused to let a spot ETF version fly.

The disagreements about the revolutionary push of crypto are expressed in varying forms, and Lagarde and Gensler have showcased two of the ways one can antagonize crypto within the confines of regulatory measures.

Introducing Digital Euro to Protect Monetary Sovereignty amid Cashless Tendency: Lagarde

Christine Lagarde, the President of the European Central Bank, and Fabio Panetta, a member of the ECB’s Executive Board, have shared their thoughts on the need for the digital Euro amidst the waning influence of fiat cash.

In a blog post, Lagarde and Panetta identified three major avenues through which the Euro as paper money is no longer in vogue, noting that if left unaddressed, it could affect the overall relevance of the financial landscape of the European Union. As a part of the disruptive financial landscape identified, paper money is now being used relatively less with digital payments offered by the private sector taking centre stage.

Lagarde and Panetta noted that the dependence on private digital payments outfits is risky as private institutions cannot effectively replicate the roles of the central bank. While discrediting traditional private money service firms that their roles will bring in confusion, they noted that stablecoins on the other hand are “vulnerable to runs.”

Another fear the two pointed out is the fact that permitting private payments to dominate can invite non-European solutions and technologies to dominate the EU payment landscape.

Presenting the Digital Euro as the Solution

Lagarde and Panetta, in their submission, posited that only the Digital Euro, a complement to Fiat Euro, can wade off the current threats that are described above.

They pointed out that while the ECB is still working on the design concepts for the Digital Euro – projected to be completed in 2023 – there is a consensus to build the new legal tender, bearing in mind what consumers cherish the most, including “wide acceptance, ease of use, low costs, high speed, security, and consumer protection.”

“Introducing a digital euro would ensure that citizens can continue to trust in the monetary anchor behind their digital payments. It would protect the strategic autonomy of European payments and monetary sovereignty, providing a fall-back solution if geopolitical tensions intensify,” the blog post reads.

The EU is ahead of the curve when it comes to providing a detailed regulatory framework for its emerging crypto and virtual assets industry. While it is looking to promote innovation, it is also not sitting on its oars as it looks to present its CBDC as the dominant payment model in the near future.