The European Central Bank has said Europe should be ready for a digital euro

The European Central Bank (ECB) has today published a comprehensive report on digital euro, saying that it needs to be prepared to issue a digital currency if and when the need arises.

Christina Lagarde, president of the ECB.

“The euro belongs to Europeans and we are its guardian. We should be prepared to issue a digital euro, should the need arise,” said Christina Lagarde, president of the ECB.

ECB executive member Fabio Panetta, formerly head of the Italian central bank, said the envisioned aim of a central bank digital currency (CBDC) would be to “preserve the public good that the euro provides to citizens.”

But a digital euro would also ensure foreign-based issuers, whether that’s other central banks or private companies, don’t become too integral to the eurozone’s stability – something that could even threaten the ECB’s monetary sovereignty.

As for the technical approach, the ECB said a digital euro “can either be centralised, with all transactions recorded in the central bank’s ledger, or feature some decentralisation of responsibilities to users and/or supervised intermediaries.” But the back-end infrastructure should be ultimately controlled by the central bank, it said.

The ECB appears to be confident that it can overcome challenges to create a digital currency. “A digital euro would preserve the public good that the euro provides to citizens: free access to a simple, universally accepted, risk-free and trusted means of payment. It also poses challenges, but by following appropriate strategies in the design of the digital euro the Eurosystem can address these,” said the central bank.

The ECB is opening a public consultation on the report on October 12. “Experimentation will start in parallel, without prejudice to the final decision,” it said.

ECB President Christine Lagarde said in Germany last month that the EU had fallen behind countries like China in CBDC development.

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