The European Central Bank has warned that a CBDC or digital euro may be needed to dispel the ghost of “artificial currencies” dominating cross-border payments.
In the ECB’s annual review of the euro dubbed the “international role of the euro”, economists Massimo Ferrari and Arnaud Mehl expressed concern over the rise of artificial currencies led by unknown “foreign tech giants” – possibly a nod to Facebook’s Diem project. Hidden reference:
“One concern could be a situation in which domestic and cross-border payments are dominated by non-domestic providers, with foreign tech giants potentially offering artificial currencies in the future.”
“Not only could this threaten the stability of the financial system, but individuals and traders alike would be vulnerable to a small number of major providers with strong market power,” the pair said.
The ECB has long expressed concern over the rise of artificial currencies or stable coins in Europe and previously told EU lawmakers Veto powers with respect to private stationary projects such as facebook diam coin.
ECB takes careful approach to launch of digital euro ECB President Christine Lagarde Noting in January that “it’s going to take a good chunk of time to make sure it’s safe,” and adding, “I expect it’s not more than five years.”
Ferrari and Mehl’s report on “CBDCs and Global Currencies” weighs in on “a number of scenarios in which the need to issue a digital euro” could be significant.
Economists emphasized the need to compete with large tech firms for payment products and services, adding that bundling a digital euro with complementary services could be one way to do so:
“A CBDC can facilitate the digitization of information exchange in payments through e-invoices, e-receipts, e-identity and e-signatures, thereby providing intermediaries with high value-added and technical content at low cost. services are permitted.”
According to the report, the deployment of the digital euro may also be required to augment the existing cross-border payments infrastructure. The authors noted that a digital euro could negate the need to use foreign currencies for international transactions, and could reduce the costs associated with doing so, which in turn would “facilitate the expansion of global e-commerce.” “:
“The low transaction cost and bundling effect may increase its appeal for invoicing cross-border transactions – both as a means of payment and as an entity for settling current transactions.”
The report also noted that “the distinctive design features of a CBDC will be critical to its global outreach,” and stresses the need to encourage the use of the digital euro through interoperability, anonymity of users, and the ability to make payments offline. gave.
However, economists stressed that anonymity combined with the need to have sufficient information about CBDC users to “build in safeguards” and identify misuse of funds for terrorism financing, cross-border criminal activity and money laundering. He has to calm down too.