Digital Euro in consideration
The European Central Bank has expressed a positive stance towards a CBDC project
In a recent report, the European Central Bank (ECB) has listed several benefits of a CBDC project, expressing a positive stance towards developing a digital currency in the Eurozone. Among other aspects, the raising of international appeal and the fight against “artificial currencies” from foreign tech giants were listed as relevant. A final decision on whether or not a digital Euro project will commence was planned to be reached by mid-2021.
Failure in offering a digital currency would endanger financial stability, the ECB warns. This is particularly relevant, as the EU is currently lagging behind in digitalization of money when compared to other major economies.
A Central Bank Digital Currency (CBDC) is a digitalized fiat, sometimes described as centralised crypto, that in part seeks to facilitate transactions and reduces costs thereof.
Several countries in Asia, most notably China, are in an advanced phase of CBDC development, while the Bahamas is the first and so far only country to have a fully functional digital currency in circulation. In Europe, Sweden has made progress in creating the e-Krona, which will likely become the first CBDC in the EU, instead of the digital Euro.
The report of the ECB stated concerns of financial instability through currency providers like Facbook, who according to the report endangers the “ability of central banks to fulfil their monetary policy mandate”. This indicates a fearful stance of the central bank towards DeFi, as can be observed with other banks around the world as well.
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