Today the European Central Bank (ECB) published its paper on the digital euro, but was keen to emphasize that it has not yet decided to issue a central bank digital currency (CBDC). By mid-2021, the Eurosystem will decide whether to pursue a formal CBDC project. However, a go ahead to work on a project won’t require a commitment to issue one.
The ECB was keen to differentiate the digital euro from crypto-assets, which are ‘not the liability of any entity’ and stablecoins that attempt to keep stable. In contrast, the digital euro IS the risk free central bank currency. It also emphasized that a digital euro would complement cash. The draft crypto-asset paper, MiCA, published by the European Commission goes into more details into its classification of crypto-assets.
The ECB goal is to be ready should a scenario arise that might necessitate a CBDC. This echos previous statements from the Bank of Canada and others. Those triggers would include a significant decline in cash use where a digital euro would help address financial inclusion. A digital euro could see off risks such as the cybersecurity threat to private sector payment systems. Another trigger would be if a foreign CBDC or private digital currency started to be widely used within the European Union (EU).
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