In a blog post, Christine Lagarde, the President of the European Central Bank, and Fabio Panetta, a member of the ECB’s Executive Board, discussed the relevance of the digital euro in the financial landscape of Europe.
Identifying three major venues where Fiat cash fails the modern times, the blog post delves into the decaying prominence of paper money, and notes how it is being used significantly less as the European population grows to depend on digital payments.
On the other hand, Lagarde and Panetta also note that it is risky to depend on digital payments as private institutions cannot replicate the role of the central bank. Allowing digital payments to dominate may also invite non-European solutions to take over the EU payment landscape.
To solve these problems, Lagarde and Panetta posit that the Digital Euro can complement the Fiat Euro. The blog post reads, “Introducing a digital euro would ensure that citizens can continue to trust in the monetary anchor behind their digital payments. It would protect the strategic autonomy of European payments and monetary sovereignty, providing a fall-back solution if geopolitical tensions intensify.”
As the ECB continues to work on a design concept for the Digital Euro, which is projected to be completed by 2023, there is a consensus to build a new legal tender that has “wide acceptance, ease of use, low costs, high speed, security, and consumer protection.”
If you see something out of place or would like to contribute to this story, check out our Ethics and Policy section.