The European Central Bank (ECB) is considering to issue a digital version of its euro, while also creating a framework that would ban high-risk cryptocurrency projects. According to Reuters these plans are meant to counter Facebook’s libra. The European Union would obviously block libra first, while other cryptocurrencies or stable coins could follow.
The ECB will work together with national central banks from within the European Union in order to develop this digital euro. It would become a true digital version of the euro that’s legal in every country. These efforts from the European Central Bank could make banking intermediaries obsolete as the electronic cash would be stored at the central bank directly.
Without the need for banking accounts and banking intermediaries, the ECB would take over many functions that are now in hands of regular banks. Obviously banks will oppose to such a scenario, while consumer satisfaction is getting lower due to their interest slowly becoming negative.
European finance ministers are likely to discuss these plans for a digital euro this Friday at a meeting. They can approve these plans for the development of a digital euro on December 5th at the earliest.
Central banks have been sleeping
Facebook announced their Libra project in June, and suddenly governments and central banks were in panic. All this time they have been sleeping, only trying to regulate the cryptocurrency exchanges. However, suddenly there was Facebook. This company has the power to connect with 2.5 billion people worldwide. Germany and France right out called for a ban on Libra, and now they teamed up with Spain, Italy and The Netherlands to block Facebook’s digital money.
Libra has undoubtedly been a wake-up call for central banks and policymakers. Global “stable coin” initiatives are the natural result of rapid technological progress, globalization and shifting consumer preferences. The demand for fast, reliable and cheap cross-border payments is bound to grow further in coming years. Policymakers and central banks should respond to these challenges.
Benoit Coeuré, BIS meeting, Berlin, September 25th 2019
This opposition from governments caused some early Libra investors to take a step back. Yet the members of the Libra Association pledged their allegiance last month. At the same time more countries started embracing the concept of digital money. Germany wanted a digital euro, while Switzerland and Sweden are on their way to create their own digital currencies. In addition China is probably the biggest country to openly embrace blockchain technology and digital currencies.
ING Bank expects every central bank to move into digital currencies within the next three years. Research from IBM suggests this process will take a couple years more.
This article was originally published at NEDEROB.