Christine Lagarde, the current president of the European Central Bank (ECB), has once again spoken in favor of the Digital Euro. In her recent interview with the L’ENA hors les murs magazine, Lagarde speaks about the future of money and why digitization is the way ahead.
As we enter the digital age, the nature of money is changing, I explain in @AnciensENA. The ECB must ensure that payments in the euro area remain innovative and highly trusted by all Europeans https://t.co/fY7w5EJBaH pic.twitter.com/M5k7y3OCxU
— Christine Lagarde (@Lagarde) November 30, 2020
The ECB President notes that with the changing times, we have to be ready for getting new innovations in place. She notes that the nature of international trade has changed rapidly over the last decades. Thus, to cater to future demands, there must be new systems in place and central banks have an increasingly important role to play here.
Lagarde notes that fiat money has survived over the last many years based on citizen’s trust and “the ability of central banks to maintain its purchasing power through monetary policy”.
Lagarde notes that it is important to understand the shifts in the global marketplace and the growing dominance of digitalization than ever before. Digitalization has given a massive push to the use of digital money with global businesses transacting trillions of dollars on a daily basis.
Non-cash payments are on the rise with the Euro Area registering an 8.1% surge over the last year. The COVID-19 pandemic has further accelerated the use of digital money. The ECB president notes that the payments and the financial services industry are all set for a massive disruption over the next five years.
The ECB thus wants to ensure that the Euro remains a proper fit for the digital age. The ECB Governing Council is already working on exploring the possibility of issuing Digital Euro for retail payments. Last month in October 202, the ECB also launched a public consultation for Digital Euro.
Lagarde further goes on to explain the importance of the Digital Euro over the existing fiat cash. She notes that central bank money is unique and crucial in a way that it provides unrestricted and risk-free access to a trusted means of payment. However, it is largely available in cash form to retailers. Lagarde notes:
“A digital euro would complement cash and ensure that consumers continue to have unrestricted access to central bank money in a form that meets their evolving digital payment needs. Issuing a digital euro might become necessary to ensure both continued access to central bank money and monetary sovereignty”.
She adds that Digital Euro will be crucial to decline the use of cash. Besides, it can improve Euro’s liquidity in the global market with improved transactions with foreign currencies. Lagarde’s comments come just a few days after Germany’s Finance Minister requested an accelerated development of the Digital Euro.
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