Rise of “artificial currencies” could threaten financial system stability, European Central Bank says
Despite being years away from any launch of its own digital currency, the European Central Bank (ECB) says governments falling behind the digital asset craze may face threats to their financial systems.
In one report Regarding the international role of the euro, the researchers stress the importance of central bank digital currencies (CBDCs) over “artificial currencies” that are being built by tech giants such as Facebook.
“Finally, it is worth paying attention to the stability risks that could arise if a central bank does not offer digital currency. One concern could be a situation in which domestic and cross-border payments are dominated by non-domestic providers, including 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 would be vulnerable to a small number of dominant providers with strong market power and the ability of central banks to fulfill their monetary policy mandate and their last resort lender’s role would be affected. The issuance of a CBDC would help maintain the autonomy of national payment systems and the international use of a currency in a digital world.
The report suggests that a digital version of the euro paired with add-on services could be a way to compete with big tech companies for payment products and services.
“A CBDC could facilitate the digitization of information exchange in payments via electronic invoices, electronic receipts, electronic identity and electronic signature, enabling intermediaries to offer higher value-added services and technological content. cheaper. “
The potential digital euro could also improve current cross-border payment infrastructures, helping global e-commerce.
“Low transaction costs and aggregation effects could increase its attractiveness for invoicing cross-border transactions – as a means of payment and as a unit for settling open transactions.”
However, the European Central Bank is in no hurry. ECB President Christine Lagarde has said that, if indeed the digital euro gets the green light, she expects the development phase to last for years.
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