The President of the European Central Bank, Christine Lagarde, recently stated that the ECB needs to stay \u201cahead of the curve\u201d when it comes to digital currencies. In light of her statement as well as China\u2019s imminent launch of a government-backed digital yuan, will the ECB become the next central bank to issue a central bank digital currency?<\/p>\n
At her first policy meeting as head of the European Central Bank, Christine Lagarde stated<\/a> that the ECB \u201cbetter be ahead of the curve\u201d in the developments surrounding stablecoins as \u201dthere is clearly a demand out there that we have to respond to.\u201d<\/p>\n While she did not go into more detail on the matter, it is clear that Lagarde – who has long recognized cryptocurrencies as something to keep an eye on<\/a> – is open to blockchain-powered payments systems.<\/p>\n Only a few days after Lagarde spoke about her interest in stablecoins, the ECB published a report titled \u2018Exploring anonymity in central bank digital currencies.\u2019<\/p>\n In the report<\/a>, the central bank says it has established a proof-of-concept (PoC) for anonymity in digital cash, which is part of the bank\u2019s ongoing technical research into central bank digital currencies.<\/p>\n While the ECB makes it clear that the PoC does not imply implementation of a CBDC, in the report it states that the \u201cECB will continue to analyze CBDC with a view to exploring the benefits of new technologies for European citizens and in order to be ready to act should the need arise in the future.\u201d Thus, leaving the door wide open for a CBDC.<\/p>\n The proof-of-concept developed by the European System of Central Banks (ESCB) shows that it is possible to build a CBDC payment system that provides users with a degree of transactional privacy for low-value transactions while still adhering to AML\/CFT checks for higher-value transactions.<\/p>\n With the support of Accenture and R3, the ESCB\u2019s DLT research network, EUROchain, has been able to create a payments system proof-of-concept that allows for AML\/CFT compliance procedures while preventing the user\u2019s identity and transaction history being seen by the central bank or its intermediaries, unless specified by the user. This is made possible through the use of so-called \u201canonymity vouchers,\u201d which enable users to transfer small amounts of CBDC over a predetermined period of time anonymously.<\/p>\n Additionally, it is important to note that in this proof-of-concept the trialed CDBC is built with intermediaries in mind. The central bank would, therefore, not disintermediate banks by transacting with users directly. Instead, commercial banks remain in their current position as intermediaries.<\/p>\n While no specific launch date has been announced by the People\u2019s Bank of China (PBoC), the launch of a blockchain-powered digital yuan is imminent if media reports<\/a> are to be believed.<\/p>\n The digital yuan could be China\u2019s preemptive strike against Libra and similar global digital currencies that could threaten its sovereign currency management. Moreover, a digital currency issued by the central bank would facilitate currency oversight and could help to boost the yuan\u2019s global presence.<\/p>\n From a currency management point of view, a digital yuan makes sense. Capital inflows and outflows could be kept under control as cash could largely be taken out of circulation and money flows could be followed closely.<\/p>\n For the people of China, however, the digital yuan will likely mean another layer of surveillance and a decrease in their level of individual financial sovereignty. While Mu Changchun, head of the People\u2019s Bank of China\u2019s digital currency research institute, told<\/a> the audience at a conference in Singapore, \u201cwe know the demand from the general public is to keep anonymity by using paper money and coins… we will give those people who demand it anonymity in their transactions,\u201d it is hard to envision the country\u2019s leaders to provide much – if any – transactional privacy to its digital currency\u2019s users.<\/p>\n Regardless of the digital yuan\u2019s effect on China\u2019s economy, its population, or global commerce, the launch of the first CBDC by a major global economy will most likely cause other nations and currency unions to follow suit.<\/p>\n In light of the ECB\u2019s research into the matter and the new ECB head\u2019s openness to digital currency innovation, the European Central Bank may well become the next issuer of a CBDC.<\/p>\n","protected":false},"excerpt":{"rendered":" The President of the European Central Bank, Christine Lagarde, says the ECB needs to stay ahead of the curve when it comes to digital currencies. Will the European Central Bank be the first to deploy a central bank digital currency?<\/p>\n","protected":false},"author":18,"featured_media":31249,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[630,2178],"_links":{"self":[{"href":"https:\/\/bravenewcoin.com\/wp-json\/wp\/v2\/posts\/31248"}],"collection":[{"href":"https:\/\/bravenewcoin.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bravenewcoin.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bravenewcoin.com\/wp-json\/wp\/v2\/users\/18"}],"replies":[{"embeddable":true,"href":"https:\/\/bravenewcoin.com\/wp-json\/wp\/v2\/comments?post=31248"}],"version-history":[{"count":0,"href":"https:\/\/bravenewcoin.com\/wp-json\/wp\/v2\/posts\/31248\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/bravenewcoin.com\/wp-json\/wp\/v2\/media\/31249"}],"wp:attachment":[{"href":"https:\/\/bravenewcoin.com\/wp-json\/wp\/v2\/media?parent=31248"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bravenewcoin.com\/wp-json\/wp\/v2\/categories?post=31248"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bravenewcoin.com\/wp-json\/wp\/v2\/tags?post=31248"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}The ECB is exploring privacy in CBDC<\/h2>\n
China will be the first major economy to launch CBDC<\/h2>\n