Christine Lagarde, the president of the European Central Bank (ECB), acknowledged the significant developments in the crypto sector but indicated that a ‘digital Euro’ pilot would still require “at least another two years” before reaching its final form.
While speaking to members of the EU Parliament’s Economic and Monetary Affairs Committee this past Monday, Lagarde emphasized that a central bank digital currency (CBDC) isn’t designed to obliterate or replace cash.
She elaborated on the potential benefits, saying, “If we can ensure it’s user-friendly, cost-free, and becomes a universal digital payment method across the entire Euro system, then I believe it will have met several key criteria that would deem it a success.”
ECB Mulls To Address ‘Conspiracy Theories’
Christine Lagarde, the head of the ECB, highlighted the need to tackle prevailing “conspiracy theories” surrounding CBDCs in order to truly deem them successful.
Addressing these concerns, she said, “If we can dispel the myths and conspiracy theories suggesting that a ‘BIG BROTHER’ entity would control and monitor every purchase or transaction, then I believe we can confidently mark the CBDC endeavor as a success.”
Lagarde’s comments came in response to inquiries made by Nicola Beer, a centrist German lawmaker. Beer sought clarity on how the ECB plans to address major privacy issues related to transaction limits, possession ceilings, and identification procedures, especially considering the complete traceability these might entail.
Specifically, Beer mentioned the bank’s strategies to combat money laundering and its potential move to limit significant CBDC holdings to prevent destabilizing the traditional banking system. She questioned, “Won’t such measures impact the public’s reception and adoption of the digital euro?”
Lagarde emphasized the critical balance between user privacy and regulatory oversight, stating, “The acceptance and utilization of digital currency will largely hinge on our ability to guarantee user privacy. However, this doesn’t mean complete anonymity, but rather a protected sense of privacy.”
Digital Euro “Not Yet Out There”
Christine Lagarde emphasized the extensive efforts made over the past three years to understand European preferences regarding a CBDC. However, she clarified that “the governing council will only determine the future of the project after thorough deliberations in late October.”
“We anticipate that piloting the project will span at least another two years before we can conclusively determine its trajectory,” she added.
Lagarde’s sentiments echo those of ECB Board Member Fabio Panetta, who earlier this month stated that an immediate decision by the Governing Council to roll out a digital euro is not on their immediate agenda. Such a decision “will be considered only after the legislative process is completed,” he affirmed.
Panetta emphasized the potential advantages of the initiative, asserting, “I want to reiterate that introducing a digital euro offers promising prospects rather than challenges for the European financial landscape. Our aim is to create a reliable payment mechanism that upholds the essence of public money, while simultaneously fostering payment innovation, ensuring financial stability, and safeguarding user privacy.”