The European Central Bank President, Christine Lagarde, addressed the ECB’s top brass, saying that the bank needs to outline the objectives of its upcoming cryptocurrency project before the development and the technical process begins, at a conference on Thursday.
The European Central Bank is expected to have a thoroughly detailed set of objectives for its digital currency, by the middle of next year. Lagarde raised some questions for the ECB at the conference about the future of digital currency, such as will it reduce costs or if the ECB is simply trying to eliminate a middleman. Lagarde said that there is a variety of objectives that can be trailed after the crypto project; for instance, the bank’s goal of creating a new inclusive financial system at no cost.
Lagarde claims that the bank should be thinking ahead before getting more involved in the project. She further acknowledged the interest of central banks in various countries such as Canada and the United Kingdom. She also said that her personal belief is that there is more development in stablecoin initiatives rather than in Bitcoin(BTC)trade; accordingly, the bank should work quickly in those stablecoin directions because there is demand out there that needs to be responded to.
The ECB has spent the past several weeks discussing the benefits and drawbacks of developing its own cryptocurrency that would ensure the sanctification of the demand and needs of consumers, similar to traditional fiat currency without the aspect of storing it physically.
ECB’s Debate about Central Bank Cryptocurrency
On one hand, digital currency would be cheaper and easier for the public to store; however it can have dire consequences on the current financial system. During all sorts of economic crises, users would be able to resort to switching to the ECB cryptocurrency and that can impact the bank negatively. However, cryptocurrency will allow the bank to insert liquidity directly into the economy if it is looking to boost inflation, making policy more effective by bypassing the financial sector.
Since Facebook publicized its plans about launching a cryptocurrency called Libra this year, the ongoing discussion of central banks developing a digital currency heightened and many banks became interested in the idea themselves.
Cryptocurrency projects are often met with resistance by regulators due to potential criminal activity that can be aided through them. Due to issues such as money laundering and consumer protection along with their own lack of control over this new crypto financial system, they can often meet a lot of obstacles. EU finance ministers raised these issues and demanded that all the risks will be assessed beforehand.
