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ECB: Digital Euros to Boost Global Appeal of European Money, Fight ‘artificial Currencies’ – Finance Bitcoin News

The European Central Bank has said in a new report that the digitization of traditional currencies such as the euro has the potential to increase their international appeal. The ECB has warned that failure to offer a digital currency would threaten financial stability. Regulators are concerned about the potential for the tech giant to dominate payments through its “artificial currencies.”

Eurozone Central Bank reviews role of euro in light of CBDC project

The global appeal of fiat currencies depends on economic fundamentals, but some features of the digital currency may drive their adoption beyond the issuing jurisdiction, the European Central Bank (ECB) noted in a recent review of the euro’s international role. is. The regulator says that specific design features may encourage non-residents to use the digital euro as a means of payment, unit of account and store of value.

ECB: Fight digital euros, 'artificial currencies' to boost European money's global appeal

Security is a key feature, the bank explains, will have a claim on a central bank digital currency (CBDC) issuer’s balance sheet and can reduce the risks associated with traditional cross-border transactions that involve correspondent banking.

CBDCs will lower transaction fees, expand access to payment services, and reduce the mark-up of intermediaries. For example, a remittance transfer may be more efficient.

The central bank of the eurozone believes that CBDCs can function partially or fully in countries with weak economies as an alternative to volatile national currencies, a local means of payment, a savings vehicle and eventually accounts. can become a unit of A digital currency will facilitate the use of electronic invoices, receipts, identification and signatures. End users can benefit from access to products that compete with those offered by large tech companies.

ECB worried about dominance of foreign tech giants

The European Central Bank emphasizes that CBDCs will help maintain the autonomy of domestic payment systems. On the other hand, failure on the part of a central bank to offer a digital currency would pose a risk to the stability of the financial system. The authors of the CBDC section of the report, Massimo Ferrari and Arnaud Mehl, caution:

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.

Companies such as the global social media platform Facebook are working to develop their native currencies, whose popularity could grow rapidly due to their large customer base. According to the economists, “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.” Ferrari and Mehl think that “the ability of central banks to fulfill their monetary policy mandates and role as lenders of last resort will be affected.”

ECB: Fight digital euros, 'artificial currencies' to boost European money's global appeal

The study, which was published on Wednesday, also explores alternative design options for a digital currency, noting that specific features will determine the global outreach and international role of a currency that has a CBDC denomination. These features include interoperability with non-domestic payment systems, restrictions on use by non-residents, user anonymity, and built-in mechanisms for online as well as offline transfer and settlement.

“The digital euro may contribute to the strengthening of the euro’s global appeal, but will not replace the fundamental forces that define the status of the international currency” such as stable fundamentals, the size of the issuing economy, and the liquidity of financial markets concludes, noting the importance of cooperation with other central banks in the G20 format.

The ECB has not yet launched a digital euro project. Officials have previously indicated that a decision by the governing council is expected around mid-2021. Dozens of countries are already working to issue CBDCs, including China, the US and Russia.

What is your opinion of central bank digital currencies? Share your thoughts on this topic in the comment section below.

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CBDC, CBDC, central bank, central bank, currencies, currency, digital currencies, digital currency, digital euro, euro, europe, european central bank, eurozone, facebook, tech giant

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