“A digital euro could be a complement to, not a substitute for, cash,” Lagarde
Any digital euro currency would always be considered as a complement rather than an outright substitute to traditional cash. This was according to the president of the European central bank, Christine Lagarde.
She made the declaration during her introductory speech at an online meeting attended by members of the Franco-German parliamentary assembly on the September 21, 2020.
She further explained that the bank was exploring the “benefits, risks and operational challenges” of a European Central bank digital currency (CBDC), but maintained that it is very likely that the fiat currency would still be relevant in the digital future.
“A digital euro could be a complement to, not a substitute for, cash,” according to Lagarde.
“It could provide an alternative to private digital currencies and ensure that sovereign money remains at the core of European payment systems.”
She seemed to be addressing concerns from regulators and governments that a hugely widespread cryptocurrency could threaten the core power of central banks to control monetary policy and may even lead to a shift from the use of the fiat.
On September 10, the European central bank president had stated that the Euro system is yet to decide on whether or not to introduce a digital Euro, but added that a taskforce will be setup to analyze the potential of a CBDC “in the coming weeks”.
Lagarde has long been an advocate for the development of a digital euro by the European Central Bank, in order to keep up with the digitization of financial systems worldwide.
A year ago, September 2019, when she was International monetary fund (IMF) chief, Lagarde had stated that she would increase efforts towards ensuring that financial institutions on the European union are open to cryptocurrency, so as to seamlessly adapt with the changing dynamics of the current financial environment.
In August, Lagarde said foreign providers had “taken the lead on development of digital payment modules due to the lack of an integrated financial infrastructure in Europe, but that a digital euro would allow them to make up lost ground. The digital euro is seen as an important part in the future of the economic union ECB’s digital currency, and should function alongside the fiat, to ensure “sovereignty and autonomy” of the Europe’s monetary and financial systems.
She, however, also expressed concern over the “unprecedented crisis” the EU economy was facing as a result of the COVID-19 pandemic, adding that any form of financial recovery would be “uneven and incomplete” and would ultimately be determined by how well the pandemic is controlled by the relevant authorities.