A top official of the European Central Bank (ECB) has revealed that the bank is currently exploring the benefits of launching a Central Bank Digital Currency (CBDC), to be prepared for any future changes in the global financial market.
Yves Mersch, a member of the executive board of the ECB and vice-chairperson of the bank’s supervisory board, made this known today at Coindesk’s Consensus 2020 virtual conference. Mersch cited a survey that shows the ECB as one of the central banks working on developing a CBDC as part of the efforts to embrace financial technological innovation in the future.
This innovation, according to Mersch, can offer faster payments than the traditional payment system. Interestingly, Mearsch acknowledged that people’s need for fiat currencies is gradually declining by the day, and as such, the bank would not want to lag when they start requesting for digital currencies.
“We would want to preserve their direct link to the ultimate owner of our currency by maintaining their access to central bank liabilities in euro,” he added.
However, the ECB may not be launching its digital currency until they find it necessary as the bank does not currently see a “business case” for a CBDC at this time, but that does not prevent them from exploring the innovation.
“The lack of a concrete ‘business case’ for a CBDC at present should and does not stop us from seriously exploring the optimal design of a CBDC so that we will be well prepared should we ever take a policy decision to issue a digital currency. To this end, we have set up a task force on a CBDC within the Eurosystem,” Mersch explained.
The change in payment behavior recently signaled by users has prompted several central banks to consider launching a CBDC.
According to a recent study conducted by the Bank for International Settlement on 66 central banks, more than 80% of these banks are already working on developing CBDC, with a few like the People’s Bank of China close to launching one officially.
Financial technology innovation has also forced several nations to adopt a cashless economy, where people will not have to use cash to make payments for goods and services.
Even though several countries are already showing massive interest in digital currencies due to the low value of their currencies, Mersch said that Europe is exempted.
He noted that fiat currencies account for more than 76% of all transactions conducted within the region, and the demands for fiats have soared over the years. However, the decision on whether or not the ECB would launch a CBDC strictly lies on public demand, Mersch said.
In a similar development, the Bank of Korea (BoK) launched an experimental trial to determine the requirements of issuing a government-backed digital currency in the future.