Christine Lagarde comments on the introduction of the digital euro and crypto-currencies
In November, Christine Lagarde, President of the European Central Bank, spoke of a possible introduction of the digital euro in January 2021. Recently, she spoke again about the digital currency. In her remarks, she also addressed the risks of crypto-currencies.
In an article published in the newspaper L’ENA hors les murs on 30 November, Lagarde once again described by Bitcoin Millionaire the digital euro as “complementary” to physical cash. The main objective of the introduction of the euro is to meet the needs of European citizens.
It could be important in a number of future scenarios, from a reduction in the use of cash to preventing the introduction of foreign digital currencies in the euro area.
Mr Lagarde said that the issue of a digital euro could become a necessity in terms of currency security. At the same time, the introduction of digital currency would have a certain symbolic character. She sees the chance that Europe’s digital economy could be united in this way. However, Lagarde is rather sceptical about crypto-currencies such as Bitcoin. She made it clear that crypto-currencies carry not only opportunities but also great risks:
The main risk is to rely solely on technology and the flawed concept that there is no identifiable issuer or claim. This also means that users cannot rely on crypto assets to maintain a stable value
Currency sovereignty threatened by crypto-currencies?
Lagarde is of the opinion that crypto-currencies drive additional innovations in payment transactions. They would also integrate well with social media and similar platforms. Nevertheless, she sees risks regarding currency sovereignty:
For example, if the issuer cannot guarantee a fixed value or if they are perceived as incapable of absorbing losses, there could be a run. In addition, the use of stable coins as a store of value could trigger a strong shift from bank deposits to stable coins, which could affect banks’ operations and the transmission of monetary policy.
Introduction of the digital euro still at least five years away?
On the same day, a panel of experts from various European banks also discussed the possible introduction of the euro. Austėja Šostakaitė from the European Central Bank, contrary to Lagard’s statements, stated that the decision on the introduction of the digital euro would not be taken before mid 2021 at the earliest. Carl Andreas Claussen, advisor to the Swedish Riksbank, also believes that it will take a long time before clarity can be achieved in this respect.