In November, the President of the European Central Bank Christine Lagarde spoke of a possible introduction of the digital euro in January 2021. She recently spoke again about the digital currency. In her statements she also addressed the risks of cryptocurrencies.
In an article in the newspaper L’ENA hors les murson November 30th, Lagarde once again described the digital euro as a “complement” to physical cash. The main aim of the introduction is that the euro meets the needs of European citizens.
It could be important in a number of future scenarios, from a decline in the use of cash to preventing the introduction of foreign digital currencies in the euro area
Lagarde said that the issue of a digital euro could become a necessity in terms of currency security. At the same time, the introduction of the digital currency would have a certain symbolic character. She sees the chance that Europe’s digital economy could be united in this way. However, Lagarde is rather skeptical of cryptocurrencies such as Bitcoin. She made it clear that in addition to opportunities, cryptocurrencies also entail major risks:
The main risk is to rely solely on technology and the flawed concept that there is no identifiable issuer or claim. It also means that users cannot rely on crypto assets to maintain a stable value
Currency sovereignty at risk due to cryptocurrencies?
Lagarde believes that cryptocurrencies are driving additional innovations in payments. They would also integrate well with social media and similar platforms. Nevertheless, she sees risks with regard to currency sovereignty:
For example, if the issuer cannot guarantee a fixed value or if they are perceived as incapable of absorbing losses, a run could result. In addition, the use of stable coins as a store of value could trigger a large shift from bank deposits to stable coins, which could affect bank operations and the transmission of monetary policy.