The European Central Bank is not yet ready to issue its own cryptocurrency, but it does not deny the importance of knowing the potential of this type of technology. That is what Mario Draghi, its president, expressed in a letter addressed to the European Parliament this Wednesday, September 12.
“The ECB and the Eurosystem currently have no plans to issue a central bank digital currency. Nonetheless, we are carefully analyzing the potential consequences of issuing such a currency as a complement to cash. In this regard, we are closely following activities by other central banks and working together with the central bank community in the context of standard-setting bodies such as the Committee on Payments and Market Infrastructures (CPMI)..”
Fiat Money 1 – Cryptocurrencies 0
According to Mr. Draghi, a CBDC or Central Bank Digital Currency would need a “substantial development” to be able to guarantee the security and soundness necessary to strengthen the economy at a global level, or at least at a national level (if adopted just by one country). However, despite the constant advances that have been consolidated in the field of blockchain technologies, there is still a long way to go before they become functional for a Central Bank:
“There are several reasons why we do not consider issuing a central bank digital currency to be a concrete option for the near future. First, the technologies which could potentially be used to issue a central bank digital currency, such as distributed ledgers, have not yet been thoroughly tested and require substantial further development before they could be used in a central bank context.”
He also commented that the use of cryptocurrencies for microeconomic operations (contrary to those that have an impact on macroeconomic levels), would generate unnecessary and harmful competition that could lead to significant risks and operational costs:
“With regard to the central bank administering individual accounts for households and companies, this would imply that the central bank would enter into competition for retail deposits with the banking sector and lead to potentially substantial operational costs and risks.”
Central Banks Don’t Need Cryptos… Yet
Mr. Draghi continued his letter stating that there is currently “no concrete need” to issue an additional currency within the eurozone. The President of the European Central Bank stated that fiat money continues to be the preferred and necessary medium of exchange in today’s society. In fact, he assured that the demand for cash banknotes “continues to grow” in the EU28.
The use of the traditional centralized fiat system brings certain benefits for the end user, who is willing to lose some power in exchange for the sense of security provided by banks. The stability and global acceptance of fiat money is perhaps the most important advantage of this system over cryptocurrencies, which even today have not been able to consolidate as a market independent of the traditional fiat system – which cryptos claim to revolutionize and substitute.