A European Central Bank (ECB) report entitled “The international role of the euro” has outlined the threat to countries that elect not to launch a central bank digital currency (CBDC).
- Domestic and cross-border payments could be dominated by non-domestic providers, according to the report published Wednesday.
- The report gives as an example “foreign tech giants potentially offering artificial currencies,” akin to Facebook’s Diem (formerly Libra) project that sent shockwaves through the financial world on its announcement in 2019.
- Market dominance by such a privately issued currency would leave consumers and businesses vulnerable should it threaten the stability of the financial system.
- “Issuing a CBDC would help to maintain the autonomy of domestic payment systems and the international use of a currency in a digital world,” the report concludes.
- A CBDC would also enhance the global status of the currency in which it is denominated if it’s adopted in countries with unstable currencies. This would also “reduce monetary policy autonomy in the economies concerned,” according to the report.
- The European Commission and the ECB have been discussing the potential launch of a digital euro since the start of 2021, with central bank President Christine Lagarde saying in March that one could be launched within four years, should the decision be taken to proceed.