No, the EU is Not Issuing a State-Backed Cryptocurrency
Mario Draghi, President of the European Central Bank (ECB), said that the authority does not see a “concrete need” for a digital token alternative to the euro, according to Reuters.
No Time for Crypto
Highlighting the stability of fiat money and the infamous volatility of cryptocurrencies, Draghi told parliament members that a lack of robustness in blockchain technology, as well as the absence of sustainable infrastructure to facilitate a crypto economy, meant digital tokens were not a priority for the bank.
He also expressed that paper currency is widely used across the EU, which mitigates the necessity of instilling a novel monetary system for the general populace. With this, Draghi stated both ECB and the broader Eurozone “have no plans” to issue the so-called “Central Bank Digital Currency.”
Drawing attention to distributed ledger technology, the underlying protocol of all cryptocurrencies, Draghi noted the system would require “substantial further development” in the years to come. His remark presumably hints at the absence of research literature and related breakthroughs pertaining to blockchain.
Research conducted by the ECB, meanwhile, indicated that 78.8 percent of all payments were made with cash in the EU, with only 19.1 percent consisting of credit and debit cards. Only 2.1 percent of payments were classified as “other mechanisms.”
For the ECB, a state-owned cryptocurrency means citizens can bypass traditional banking infrastructure and potentially evade monetary policy. Such a scenario causes considerable concerns for the broader economy.
EU’s Decisions Not Agreed with Globally
Despite the apparent setback, the ECB’s opinions may not compare with the developments of both its peers and member constituencies.
Sweden, for example, is exploring an e-krona, or a cryptographic version of its national currency. Piloted by the country’s central bank, the Riksbank, the experiment is a response to the declining use of cash and a rise in electronically-conducted payments in the country.
Norway is following a similar approach and is exploring the creation of a state-backed digital asset to remain on par with the increased usage of electronic payments.
On the other side of the world, the Bank of Thailand revealed pilot tests for a native CBDC were conducted and proof-of-concept conclusions have displayed promising results. The bank also partnered with eight local financial institutions to create digital currency framework on the Corda blockchain.
Reports have also confirmed that China, which has historically been anti-cryptocurrency, is researching and developing a CBDC, courtesy of the People’s Bank of China’s Digital Currency Lab. In addition, the lab possesses over 40 patents on blockchain technology, which sources suggest would be used to underpin the digital yuan.
Cover Photo by Frederic Köberl on Unsplash
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