The recent announcement of the European Central Bank (ECB) last Friday states that it will begin its steps in experimenting and deciding the release of a digital euro. This electronic version of euro notes would be legal tender and would be guaranteed by ECB.
In a report that indicates the benefits and risks released, ECB says that the virtual euro is safe and fit for the fast-changing digital world. Since users will be allowed to deposit directly to the ECB, it is considered as a more secure platform than commercial banks, which tends to go bust or possessing cash, which can get lost or stolen.
The lockdown caused by the novel coronavirus also pushed people to increase their trust in digital payments, that looking into adoptive changes shall be considered. The digital euro is meant to supplement cash and not replace it. Compared to private digital currencies like Bitcoin or Facebook’s Libra, its rate would be more stable as it is backed by the central bank.
However, it also poses some risks. Some of them include the weakening of traditional banks, especially during times of crisis like natural disasters or a pandemic. Certain concerns like the right to privacy, possible cyber risks, and legal considerations are being considered as well.
ECB President Christine Lagarde, however, states that “Our role is to secure trust in money. It means making sure the euro is fit for the digital age. We should be prepared to issue a digital euro, should the need arise.”
A series of experimentation will be launched by the ECB for the next six months, along with a three-month consultation. The decision on whether to release or terminate the project launch is set in mid-2021.