According to Christine Lagarde, the President of the European Central Bank, no digital currency that will be released within the borders of the European Union will be able to fully replace physical money.
Lagarde stated this during an online meeting of the Franco-German Parliamentary Assembly. The President also admitted that, at the moment, the bank is exploring the risks, benefits, and challenges that a new digital currency (the CBDC) might pose but no full replacement of cash is in sight.
According to her, the digital euro is supposed to act as a complement to cash, not its replacement, and that it should actually be an alternative for digital currencies. Still, physical money will remain at the very core of the European payment systems.
Consumer preferences were also discussed as Lagarde stated that more and more people have now resorted to digital contactless payments, especially with the global pandemic and the risk of Coronavirus contamination. During these months, Europeans have used online platforms to shop which clearly talks of a digital revolution that has already begun. It seems that four out of five Europeans use the internet on a regular basis. The difference is extraordinary, especially when considering that two decades ago, only one in five people did. The global pandemic is not a pleasant experience for anyone but it has helped the world in one area: it has pushed the digitalization trend forward.
A few days ago, Lagarde revealed that the Eurosystem is yet to reach a conclusion regarding the introduction of the digital euro. However, the coming weeks should bring a comprehensive analysis concerning the potential effects of a digital currency on the continent.
Lagarde is known for being a huge supporter of digitalization and has encouraged the central bank to develop a digital euro for years. Exactly one year ago, as the head of the International Monetary Fund, Lagarde promised to put more focus on the EU institutions and their efforts to adapt to a continuously-changing financial environment. Being open to cryptocurrencies was the first step towards reaching that goal.
However, the ongoing global pandemic has seriously affected the European economy which goes through a crisis, Lagarde also mentioned. As of now, recovery is uncertain and incomplete, at least until we know more about the virus and to stop its spreading.
On the other hand, Tyler Winklevoss, the famous Bitcoin billionaire, has stated that the European Central Bank’s decision to not change its interest rates and COVID-19 stimulus programs despite a strong euro is definitely a hugely-strong advertisement campaign for Bitcoin.