The European Central Bank (ECB) Executive Board Member, Fabio Panetta, has recently stated that a digital euro is necessary to maintain central bank money dominance. In a speech given at a virtual conference hosted by the Basel Committee on Banking Supervision and the Basel Institute of Commons and Economics, Panetta discussed the potential benefits of a digital currency for the eurozone.
Panetta highlighted the increasing demand for digital payments and the rise of cryptocurrencies as reasons to consider a digital euro. He stated that, “A digital euro would provide all Europeans with access to a safe form of central bank money that they can use and rely on, even when cash is not available.”
The ECB has been exploring the possibility of a digital euro for some time, and recently launched a public consultation on the matter. The consultation will gather feedback from citizens, businesses, and other stakeholders on the advantages and disadvantages of a digital euro, as well as its potential design and distribution.
One of the key benefits of a digital euro, according to Panetta, is that it would help to maintain central bank money dominance in the eurozone. He stated that the introduction of a digital currency by a foreign issuer could challenge the position of central banks as the sole issuers of money.
Panetta also spoke about the potential impact of a digital euro on monetary policy. He stated that a digital currency could allow central banks to implement negative interest rates more effectively, as it would be more difficult for individuals to hold physical cash outside of the banking system.
Overall, Panetta’s speech highlights the growing importance of digital currencies in the global economy, and the need for central banks to stay ahead of the curve. While a digital euro is not yet a certainty, it is clear that the ECB is taking the matter seriously and is exploring all options to ensure the continued dominance of central bank money.