European Central Bank Launches Public Survey on Digital Euro
As European Central Bank (ECB) president Christine Lagarde confirmed the institution is considering the launch of a digital euro, the ECB has launched a public survey for consumers to express their preferences with regards to a central bank-issued digital euro. The revelation comes after U.S. Federal Reserve chair Jerome Powell discussed the likelihood of a central bank digital currency (CBDC).
In a tweet thread reflecting on the past year of ECB operations and the plans for the year ahead, Lagarde wrote:
We’ve started exploring the possibility of launching a digital euro. As Europeans are increasingly turning to digital in the ways they spend, save and invest, we should be prepared to issue a digital euro, if needed.
The survey includes questions on consumer priorities with a digital euro, such as ease of use, security, transaction fees, and contactless payment options.
Further included in the survey is a question relating to the issuance with or without the need for intermediaries, noting that a version that doesn't require the ECB to be involved in the processing of every single payment would allow consumers "to use the digital euro even when not connected to the internet" and better protect their privacy, while a version with intermediaries in every transaction would "allow broader potential for additional services."
Why Issue a Digital Euro Now?
Lagarde’s statement on the digital euro coincides with the pilot launch of China’s national digital currency.
On November 2nd, South China Morning Post reported that the early-stage test of China’s Digital Currency Electronic Payment (DCEP) hit $300 million in volume. People’s Bank of China’s (PBOC) governor Yi Gang confirmed that the DCEP, also known as the “digital yuan,” had hit 4 million transactions.
Meanwhile, the U.S. government and ECB remain exploring the possibility of creating CBDCs - a sign that both are falling behind China in the digital currency domain.
Meanwhile, demand for Bitcoin as a store of value is soaring.
As the BTC Times extensively reported, Bitcoin saw a consistent inflow of capital from institutions in the fourth quarter. The $425 million bulk bitcoin purchase by MicroStrategy earlier this year sparked an institutional frenzy around the dominant cryptocurrency. Consequently, major financial institutions have begun discussing the value proposition of Bitcoin and integrating crypto brokerage services.
The West Feels the Pressure to Respond to China’s Strategy
Deutsche Welle, a state-owned broadcaster in Germany, said China is leading the race for digital currency.
Konrad Adenauer Stiftung’s senior project manager Alexander Badenheim stated that China would attempt to increasingly separate itself from SWIFT and other U.S.-led financial systems.
[China may] hope to create its own international payment architecture, something comparable to SWIFT, but which would be more centered on digital currencies and dominated not by the US dollar, but by the Chinese digital yuan. I think that's especially important in current times where we talk about the decoupling between the US and China.
To keep up with China's monetary infrastructure development, the U.S. and Europe will have to seek progress with regards to their own digital currencies. In recent weeks, this likely fueled financial regulators in the U.S. and Europe to address digital currency development.