Could Central Banks’ Digital Currency Projects Be Nothing But a Big Bluff?
Contrary to the public statements, insiders at the European Central Bank (ECB) reportedly say the bank has no laboratory working on a digital euro and little intention to create one any time soon.
“Most of these comments [about the digital fiat] seem designed to jolt the private sector banks into improving the inefficient, costly and time-consuming world of cross-border payments,” Financial Times’ Martin Arnold wrote in an opinion piece today.
In a recent document titled Innovation and its impact on the European retail payment landscape, the ECB says it will “continue to assess the costs and benefits of issuing a central bank digital currency (CBDC) that could ensure that the general public will remain able to use central bank money even if the use of physical cash eventually declines. Prospects of central bank initiatives, however, should neither discourage nor crowd out private market-led solutions for fast and efficient retail payments in the euro area.”
Also, the Bank of France (BoF) is supposedly planning to launch its own digital currency in 2020, jumping on the bandwagon with other EU central banks and the ECB, Reuters reported yesterday, citing a document which says that the launch of a European digital currency could be necessary if international payments within Europe remained too expensive.
François Villeroy de Galhau, the governor of the BoF, said on 4 December that his bank was determined to launch research on the digital currency “quickly,” and allocate funds to the project by the end of the first quarter of 2020, according to a separate report by Business Insider France. The currency, which is to be dedicated for transactions involving “significant amounts” of money, will basically be a digital euro, according to the BoF.
“To the untrained eye, several of the world’s top central banks appear to be rushing towards launching their own cryptocurrencies any day now.<…> Yet, listen carefully to the central bankers, and it soon becomes apparent that all of this talk about launching their own cryptocurrencies is likely to be one big, elaborate bluff. [Christine Lagarde, the new president of the ECB,] summed up this contradictory position this week when she told the European Parliament that central bank-issued digital currencies were ‘an area where we have to rush slowly’,” Arnold said.
He recognized that Facebook’s plan to deploy Libra has been “a serious wake-up call for central bankers,” raising a wide range of fears amid the financial establishment due to its “potential to dilute the main power of central banks — to control the supply of money to the economy.”
As reported today, the EU Council and the Commission adopted a joint statement, warning that no global stablecoin project should receive the green light in the EU “until the legal, regulatory and oversight challenges and risks have been adequately identified and addressed.”
Meanwhile, in August, Jerome Powell, the chairman of the Federal Reserve (Fed), the central bank in the U.S., said that Fed is “seriously considering” to develop a new and faster payments system for domestic use in the U.S.