The ECB sees the digital euro as a more efficient means of payment than cryptocurrencies

Cryptocurrencies are not an efficient means of payment, European Central Bank officials have warned in a new article discussing the benefits of the digital euro. According to them, the project should give Europeans "easy access to central bank money" in the digital era.

The trend towards digital money brings risks

Maintaining access to central bank money is essential to financial stability. The digital euro can achieve this, according to European Central Bank President Christine Lagarde and member of its executive board Fabio Panetta.

They backed the European Central Bank's digital currency (CBDC) in an article published this week on the bank's blog, noting that the stability of the current model is that private money is backed by public money that serves as an anchor. “However, payments are now undergoing a transformation. People are increasingly paying digitally instead of cash.”

As the use of cash declines, public money could eventually lose its role as a currency anchor in Europe and the euro's credibility and international importance. A digital payments ecosystem without a strong currency anchor would create confusion about what qualifies as money, Lagarde and Panetta say, citing the example of cryptocurrencies:

They cannot guarantee one-to-one convertibility with central bank money. They are not an efficient means of payment, especially if their value is not backed by any asset.

Then there is the threat of a few providers dominating private sector solutions. Large technology companies can use their large customer bases to expand rapidly, increasing the risk of market-abusive behavior and the fact that most of them are based outside the EU could lead to the takeover of the European payments market by non-EU entities:

All this means that if we are to maintain a stable and reliable payment system in Europe, we must preserve the role of central bank money in the digital age.

They emphasize that this is precisely why the bank launched the CBDC project a year ago. The introduction of a digital version of the euro would ensure that the autonomy of European payments is protected and improve the efficiency of the payment system in general.

Both are convinced that CBDC can only be successful if it becomes part of the everyday lives of Europeans. The specifics of the design have yet to be determined, as the investigative phase will last at least another year, but some key principles are already clear.

Wide adoption, ease of use, low cost, high speed, security and consumer protection are attributes that users will appreciate. Privacy must have the highest standards, ECB chiefs say. He thinks people should be able to choose how much information they want to disclose.

A carefully designed CBDC will facilitate the transition of European society and economy into the digital age.

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