The ECB’s publicity campaign is kicking off even though the digital euro isn’t ready for use now or any time soon. The central bank is still in the early phases of experimenting in-house with virtual money and expects to start working on a prototype by the end of 2023 — at the earliest.
However, the tech giants, who are themselves developing new payment methods, have jolted the ECB’s efforts.
Facebook and 25 other companies have one such plan in the works, called Diem that could launch in the US this year.
The idea comes as a global surge in cryptocurrencies indicates the future will lie in virtual money.
The price of Bitcoin hit a new all-time high last Tuesday to reach $68,025, and the second-biggest digital coin; Ether surged by over 1 percent from the previous day to $4814.80.
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The ECB are not the only centralised bank considering the introduction of a digital currency.
China has already launched trial versions of the digital yuan, with tests being carried out in various provinces across the country.
The move is seen as an effort by Beijing to cut reliance on the US dollar.
The fall of the greenback as the go-to global currency could see the US lose trillions in commissions and value as a reserve form of payment.
More broadly, the popularity of crypto assets is skyrocketing.
The market value of ‘stablecoins’, a digital token that’s tied to a basket of assets, increased from $5 billion last year to some $120billion today.
Then there are crypto assets, such as Bitcoin, whose value is determined by investor appetite. Such virtual currencies were collectively worth around $3 trillion a few weeks ago.
ECB Executive Board member Fabio Panetta told MEPs: “The value of crypto assets today is larger than the value of the securitized assets before the global financial crisis in 2008.”
Warning that time is of the essence, the official added: “If we don’t satisfy this demand, then others will do it.”
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Central bankers face the tough task of generating public enthusiasm, however.
Polls conducted in the UK and Germany showed the majority of respondents oppose the idea of publicly-backed virtual currencies amid scepticism over the benefits they would bring and concerns of government snooping.
Facing these doubts head-on, Mr Panetta has been on an informal roadshow in recent weeks to help shift public opinion.
As the ECB’s point person for marketing the digital euro, he recently gave speeches on the necessities of a central bank-backed digital currency in various European cities, hoping that people would “love the idea of the digital euro the most”.
His pitch ranges from ensuring a public guarantee for cash to warning what could happen if tech giants take over the payment industry by tapping into cryptocurrencies.
Mr Panetta said: “If these two trends meet, the functioning of global financial markets could be altered and traditional payment services could be crowded out.”
He also pointed out that: “A digital euro would allow citizens to always have access to a solid store of value — a guarantee that a tech firm in financial difficulty wouldn’t be able to offer.”
What is clear is that introducing the digital euro won’t require any changes to the EU treaties.
Instead, it would likely be adopted through a regulation that’ll need a qualified majority of member countries to pass.
Also of importance is that the virtual currency is accepted as legal tender by shopkeepers.
This point is unlikely to factor in the bill, as it can be introduced at the national level to ensure that the digital extension of the euro holds the same validity and trust as coins and banknotes do.