The ECB President agreed to customer demand for digital currency and threw light on the two-year experiment that will study all relevant aspects related to a digital euro.
In her discussions on ‘World’s Greatest Challenges’, part of the Time 100 Talks series hosted by World Economic Forum Founder Klaus Schwab, the ECB President Christine Lagarde made her stance very clear, in support of her statement, she explained how stablecoins pretend to be a real currency however, their complete association is with an actual currency. Thus, these so-called cryptocurrencies are aligned to the dollar at all times.
ECB President Speaking on Stablecoins
She stressed the importance of defining and categorizing these new decentralized assets into appropriate groups. In a cryptic reference to the Tether-issued USDT stablecoin revelation made recently, the ECB President shed light on the misrepresentation of the reserve currencies backing these digital assets in form of fiat money. Almost 49% of US dollar reserves that were intended to back the Tether-issued stablecoin was in reality unspecified commercial paper. In yet another incident, USDC, issued by Circle and Coinbase had 9% of its reserves made of commercial paper.
The above revelations explain the importance of supervision and regulation of these digital assets or coins. The issuers of these stablecoins need to be scrutinized enough to avoid any misrepresentation from their side. The ECB President made it clear that the users should have the freedom to exchange their assets into dollars at any time and therefore issuers need to reveal the correct figures.
Relevance of Digital Euro according to the ECB President
Though Lagarde is critical of the rise of cryptocurrencies, she intends to keep customer preferences at the forefront. She mentioned that if their customers prefer to use digital coins as opposed to traditional mediums like cheque or cash, then the ECB would make the digital coins available.
When asked about the ECB’s plan for a digital euro and its launch in the next 4 years, Lagarde explained about the 2-year investigation phase that will help the institution design a digital currency focussing on user preferences as well as sound technical recommendations from merchants and other intermediaries. The investigation is set to begin in October.
The creation of such a digital currency would demand complete knowledge on its safety and security, user-friendliness, accessibility and acceptance in regions other than European Union as well as affordability.
About Christine Lagarde
Christine Lagarde is President of the European Central bank and thus a powerful personality in the European financial landscape. She had the honor of becoming the first woman to head the European Central Bank back in 2019. Apart from being an economist, she is also a politician and lawyer. She also served as the Managing Director of the International Monetary Fund from 2011 to 2019.