A digital euro could be as little as four years off, according to a top European Union official.
And when an EU central bank digital currency (CBDC) comes out, it will have the backing of the European Central Bank (ECB) from Day One, according to its president, Christine Lagarde.
“The day when we have the central dank digital currency out — any digital euro — I will guarantee it,” Lagarde said on Dutch television Sunday (May 22). “So, the central bank will be behind it.”
That makes it very different from cryptocurrencies, which she said are, in her opinion, “worth nothing” as there is “no underlying asset to act as an anchor of safety.”
The timeline came from Fabio Panetta, an ECB executive board member who is the bank’s point man on the digital euro, as well as a frequent critic of non-government-issued cryptocurrencies.
Read more: Digital Euro Could Launch Within Four Years
“The idea would be that, let’s say, four years from now, we will be ideally ready to issue the digital euro,” Panetta said last week at an event at the National College of Ireland, according to CoinDesk.
While the project is complex and unprecedented, he said per the report, “I’m a bit optimistic that in four years’ time we will be prepared.”
The digital euro is needed if the EU is to enjoy continued economic growth, Panetta said.
An EU-issued CBDC would, he argued, “fortify our monetary sovereignty and provide a form of central bank money for making daily digital payments across the euro area, just like cash for physical transactions.”
Speaking of the U.S.-backed post-Cold War global order that is breaking down under weight of the Russia-Ukraine war, Panetta added the “unprecedented economic interdependence” the world has enjoyed is beginning to “falter [as] digital technologies, changing payment habits and the race for payments supremacy are testing the complementarity of public and private money, which has long formed a cornerstone of our monetary system.”
Pointing to a “marked advance in the digitization of transactions … that has been transforming the way people pay,” the Central Bank of Chile is “of the opinion that the issuance of a CBDC would help enhance the benefits” of that change while mitigating the risks associated with it, according to a report issued this month.
“In particular, a CBDC would contribute to achieving a competitive, innovative and integrated payment system that is inclusive, resilient and protects people’s information,” the report stated, adding that “it would provide a means of payment issued by the central bank for those who find the use of cash less attractive in an increasingly digitized economy.”
A CBDC would also be a way to provide an alternative to the growth of virtual currencies, it said. While they currently play a small role in payments, CBDC “could alter the functioning of the financial market and the transmission of monetary policy if its use becomes widespread,” the bank said.
South Korea plans to update its core Bank of Korea Act next year in order to allow the introduction of a CBDC, according to a leaked government report. It will also pass a Digital Assets Basic Act regulating digital assets in order to create “an infrastructure where investors can invest with confidence” in 2023, according to the local Kookmin Ilbo newspaper. This will include strengthening “the link between digital asset trading accounts and banks by expanding financial institutions that provide real-name verification services for virtual transactions.”
SWIFT Wants In
The SWIFT financial messaging service doesn’t intend to be left out of the CBDC business. It said Thursday (May 19) in a press release that it is partnering with Capgemini on a system to allow seamless cross-border transactions using nationally issued digital currencies.
“Facilitating interoperability and interlinking between different CBDCs being developed around the world will be critical if we are to fully realize their potential,” said SWIFT Chief Innovation Officer Thomas Zschach in the release. “Today, the global CBDC ecosystem risks becoming fragmented with numerous central banks developing their own digital currencies based on different technologies, standards and protocols.”
It will also focus on making CBDCs interact smoothly with existing payments systems, the release added.