According to one of the leaders of the European Central Bank, the financial authorities in Europe can formulate a plan for the implementation of the digital euro as early as next year.
Holger Newhouse, Head of Market Innovation and Integration at the European Central Bank, attended the Singapore Fintech Festival 2020 on 7 December to discuss the global development of the central bank’s digital currencies, or CBDC.
During an online discussion, Newhouse stated that the European Central Bank expects European financial authorities to consider launching a digital euro initiative by mid-2021:
“In the middle of 2021, the Eurosystem will consider starting a digital euro project. But just to clarify, this will be an investigation phase, not a decision to conduct. This will basically allow us to come up with a real […] plan, and what can be the euro. Digital, what it will look like, how it can be implemented, if and when a political decision is made.
Newhouse stressed that the digital euro will complement, not replace, cash or large central bank deposits. He also noted that the central bank’s digital money presents significant challenges when it comes to the use of the central bank’s digital currencies abroad, especially with regard to capital management and the question of relative rewards.
“It’s going to be difficult here, and here we have to think about how we could reduce it – with serious restrictions, be it incentive schemes or something else,” Newhouse suggested.
Regarding the central bank’s digital currencies in Europe, Newhouse referred to the European Central Bank’s public advice on a potential digital euro. The consultation, which was published in mid-October 2020, aims to gather feedback from public and private stakeholders to assess whether Europe needs a digital euro.
In November 2020, Christine Lagarde, President of the European Central Bank, urged the bank to take a decision to launch the digital euro in January 2021.