The head of the European Central Bank (ECB), Christine Lagarde, said she wants a task force to identify clear objectives regarding the ECB’s proposed digital currency initiative by the middle of next year, according to a report by Reuters.
Lagarde also said the ECB should be “ahead of the curve” on the issue. The bank needs to know what it wants to do and how it will achieve its goals regarding the currency, she said.
“Are we trying to reduce costs? Are we trying to cut out the middleman? Are we trying [to] have inclusive finance at no cost? There is a whole range of objectives that can be pursued,” she said. “My personal conviction is that given developments we see, not so much in bitcoin but in stablecoins projects … we’d better be ahead of the curve because there is clearly demand out there that we have to respond to.”
A digital currency would give holders a tangible and direct claim on the ECB, similar to actual banknotes but without having to store large amounts of physical tender.
The bank has been debating both the advantages and downsides of introducing a cryptocurrency, which may give the general public an inexpensive and quick way to pay, but could also have unintended consequences concerning monetary policy and the banks own rules.
However, a digital currency would let the ECB add liquidity into the economy with ease if it wanted to grow inflation. The issue has been discussed for some time, but became more urgent once Facebook announced the creation of its own digital currency, called Libra.
The idea is a divisive one, with many critics resisting the move because of concerns over money laundering and other criminal activities, along with whether the currency will protect consumers. Finance ministers in the EU have said that private cryptocurrencies shouldn’t be allowed until all the risks involved are fully addressed.