Today the Governing Council of the European Central Bank (ECB) decided to proceed with a 24-month central bank digital currency (CBDC) project to investigate the potential of a digital euro. Even if it decides to go ahead with a digital euro, the ECB President has previously stated it would take five years to launch.
“Our work aims to ensure that in the digital age citizens and firms continue to have access to the safest form of money, central bank money,” said ECB President Christine Lagarde.
While no decision has yet been made whether to issue a digital currency, the ECB and European national central banks have outlined several motivations over the last year or more. The first, as Lagarde stated, is to ensure that as cash usage declines, there is still central bank money but in a digital form. Without a CBDC, there’s a risk that private digital currencies, including stablecoins, will dominate, and they still might. Such a scenario would make it harder for the central bank to control monetary policy, maintain financial stability, ensure low cost payments and enable financial inclusion.
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