Bank of Finland Governor Olli Rehn has spoken out in favor of the regional digital currency planned by the European Central Bank (ECB), the digital euro.
Speaking before a panel at the University of California, Rehn touted the digital euro as an integral part of the monetary system, as seen in the current digital currency trend. He argued that risky digital assets, or private digital funds as he calls them, have proliferated in the monetary system as investors appear to have lost confidence in cash due to inflation and quantitative easing.
However, while creating opportunities for innovation and financial inclusion, digital assets have faced challenges from authorities due to their volatility and high vulnerability to attack. Their low processing capacity also makes them difficult to use as a means of payment. Rehn argued that central bank digital currencies (CBDCs) could remedy most flaws in digital assets. In the case of the digital euro, it will offer pan-European payment choice for retail and cross-border digital payments.
He added that the ECB is developing the digital euro with the requirements of accessibility, robustness, security, efficiency, confidentiality and compliance with the law.
“An economy dominated by digital payments but without a strong monetary anchor would be inherently unstable… The bottom line is that the central bank should still provide the monetary anchor for the economy – and that would be the main reason if the ECB decides to issue a digital euro,” he surmised.
The ECB’s work on the digital euro so far
According to an ECB report, Rehn’s statements echo the general sentiment of the majority of central banks exploring CBDCs. The report revealed that CBDCs are seen as the only viable solution to maintain the stability of the monetary system in the digital age.
The ECB began consultation work on the digital euro last year, aiming to decide on its launch by 2023. The regional central bank has completed the first phase of consultation following a series reporting, including any privacy options the CBDC may have.
In July, the Governor of the Banque de France, François Villeroy de Galhau, announced the launch of the second phase of the consultation. The stage will involve testing a prototype digital euro for retail and wholesale use, as well as further refining the policy.
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