According to his speech at the Franco-German Parliamentary Assembly, held in Frankfurt on September 21. Specifically, Christine Lagarde, President of the European Central Bank (ECB), expressed again that the digital euro could be a complement to cash.
“Europe’s economic recovery is uncertain. Therefore, the introduction of a digital euro would strengthen the European payment system ”.
He also stated that the adoption of a digital euro could serve as an alternative to private digital currencies. And thus, ensure that sovereign money remains the core of European payment systems.
Basically, Christine Lagarde, has suggested that the euro zone could benefit from the adoption of the digital euro. As the recovery of the European Union (EU), due to the pandemic, is advancing.
What is the digital euro?
The digital euro is a virtual currency, issued by a central bank, which is known as a CBDC.
Precisely, the difference between the digital euro and the cash euro would be that we know one in bills and coins. Meanwhile, the other would be available through digital payment means.
According to Christine Lagarde:
“A digital euro would be a complement. Not a substitute for cash ”.
Very importantly, the digital euro would be backed by the states that are part of the euro zone. Meanwhile, than the other private digital currencies, they would be backed by the equity and reserves of the companies that issued them. In addition, having to comply with a regulation.
Opinion of Christine Lagarde before the Assembly
By the way, the Franco-German Parliamentary Assembly is a bilateral assembly, founded in 2019. It is made up of 50 members of the German Bundestag and 50 members of the French National Assembly.
In a way, Christine Lagarde indicated, that there is a need to adopt current digital technologies. Not only will it help the recovery from the Coronavirus, but it will position digitization for long-term prosperity and autonomy.
He also spoke about the possibility of adopting a currency from the Central Bank of the European Union (CBDC). Therefore, they are exploring the benefits, risks and operational challenges of introducing a digital euro.
Previously, in his speech on September 10, at the Deutsche Bundesbank Conference, on banking and payments in the digital world. He said that the use of the digital euro allowed us to be at the forefront of innovation.
According to Lagarde, Europe will continue to ensure that all its citizens have access to tickets at all times. And he added that the combination of the two would support financial inclusion and offer consumers the possibility to choose.
Similarly, the second consideration for the introduction of a digital euro is risk assessment. For example, if enough bank deposits are converted to digital euros, it will change the way the traditional banking sector supplies money to the economy.
“We have to ensure that a digital euro, should it be introduced, is designed in a way that contains these risks.”
Ultimately, Christine Lagarde added: “A digital euro would have to be designed to meet public demand for digital payments. Without damaging private payment solutions”.
Europe and digital currencies
Additionally, the European Union proposed a four-year term to incorporate crypto. Specifically, in its cross-border payments infrastructure.
According to Christine Lagarde’s observations, autonomy is the key to building a new digital payment infrastructure.
In reality, Europe needs to move away from its cash-dominated status quo. It is definitely time for the digital euro to complement cash.
By way of closing, Christine Lagarde said: “Everyone must be prepared for the profound changes currently affecting our economies and our societies.”.
I say goodbye with this phrase from Jean Monnet: “Europe itself is just one step towards the organizational forms of the world of tomorrow”.