Victor Ugochukwu · Dec 14, 2020 . 5min read
European Central Bank to commence public consultation for Digital Euro
The European Central Bank will be launching a three-month public consultation to determine whether to issue digital euro.
By Komal Joshi · Oct 13, 2020 . 6min read
The European Central Bank (ECB) is launching a public consultation. It is starting experiments to decide further on whether to issue digital currencies for the 19-nation currency club. Moreover, it will enable holders to make payments through the internet and possibly even offline. The concept of ‘digital euro’ comes as the Covid-19 pandemic has stimulated a transfer away from cash. This has led to policymakers apprehensively eying the growth of private cryptocurrencies such as Bitcoin.
On Monday, ECB will start a three-month consultation. It will carry out a range of experiments on a digital euro’s feasibility over the next six months. While the bank still aims to decide around mid-2021 whether to launch the project or not, an official reportedly said that it would take between 18-months to 3-4 years to see the initiative come to life.
According to reports, the digital euro would be supported by the central bank in an attempt to make it risk-free like banknotes. The European Central Bank will be competing against the current means of electronic payments like digital wallets, online banks, or cryptocurrencies. While the project is still immature, the European officials have shifted into higher equipment in the past year. This took place after Facebook Inc declared intentions to build its virtual token. Moreover, pandemic boosted digital payments.
For the first time, the project would enable individuals to have deposits immediately with the ECB. Thus, giving a greater security level as a central bank can never run out of the currency it issues. Moreover, like cash, money could be stored outside of the banking system, for instance, in a digital wallet.
Jeopardies of digital euro
To date, access to ECB money exceeding physical cash has been limited to financial institutions. Experts consider that enlarging it to the more comprehensive public could have significant economic and financial repercussions. It believes that people might bypass established accounts in favour of going digital. Nevertheless, this could undermine banks in the euro area.
Moreover, the risk would also be higher in terms of crisis, when savers may retreat to the security of a ‘digital euro’ and trigger a run on conventional banks. Moreover, to circumvent any fraud, the European officials might recommend restricting the number of digital euros that each citizen could own or exchange.
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