The European Central Bank (ECB) is looking at a form of retail digital currency of the euro, produced by the Central Bank Digital Currency (CBDC), said executive member Yves Mersch.
A retail CBDC
The ECB set up a task force earlier this year to examine what its potential CBDC might be like and the group plans to publish a preliminary report in the coming weeks, said ECB board member Mersch.
"A wholesale CBDC, limited to a limited group of financial counterparties, would be largely a bargain as usual," said Mersch. "However, a retail CBDC, accessible to all, would be a turning point, so a retail CBDC is now our main focus."
A retail CBDC could be based on a digital token distributed "in a decentralized way" without a central register, Mersch said, although it avoided saying the words "blockchain" or "distributed register".
He acknowledged that the traceability of digital transactions would raise privacy concerns among a population accustomed to paying for certain things in paper currencies. “Some argue that a token-based digital currency may not guarantee complete anonymity.
If this proves to be the case, it will inevitably raise social, political and legal problems, "he said. "We are currently investigating the legal issues raised by the potential use of intermediaries to facilitate the movement of a CBDC and also the processing of transactions in a CBDC."
Some of these legal questions include whether the ECB can outsource public tasks to private entities and what kind of supervision they would need.
One consideration for creating a CBDC is whether the use of cash is starting to decline, said Mersch. This possible decline is, at best, modest in the euro area: in March, the last month in which data can be seen, banknote circulation reached a peak of almost € 19 billion.
"Around 76% of all euro area transactions are made in cash, which is more than half of the total value of all payments." While the ECB is considering a digitized euro, there are some negative aspects to act on, including the fact that the use of a CBDC could eliminate bank deposits and other intermediaries.
If this happens, it could amplify the effects of financial crises. "If families were able to convert commercial bank deposits into a CBDC at a one-to-one rate, they might find it much more interesting to hold a risk-free CBDC than bank deposits," he said. "During a systemic banking crisis, this could trigger digital banking runs of unprecedented speed and scale, amplifying the effects of that crisis." By now it should be clear that European countries like Denmark would be well suited for a cashless economy and rely hugely on the impacts of a stable <a href="https://mininvestering.dk/kryptovaluta/">cryptocurrency like Bitcoin</a>.
Mersch, who has been with the ECB since 2012, has always declared himself skeptical about the crypto sector, claiming that bitcoin was a payment system by the quotation risky alternative as early as 2014. He also targeted the Libra project, warning that it could harm the euro.