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Last week European Central Bank (ECB) president Christine Lagarde announced the central bank’s ambition to implement a digital euro.
Lagarde’s statement shows the ECB is yet planning on staying ahead of big tech firms in the race for digital currencies, according to Paolo Ardoino, CTO at Bitfinex.
“Tech giants are understanding that if they want to increase their dominance in their own spaces, they need to have control over their users’ finances,” he says.
“It [digital euro] will generate and expedite a regulatory framework that will force companies mooting major digital asset currencies that are going to have access to billions and billions of customers already to comply and to use the official version of the digital euro that will be promoted by the European Central Bank.”
Lagarde suggested the ECB’s digital offering could dominate the continent’s payments.
“In a more digital economy, we also need to ensure the strength and autonomy of European payment systems. The eurosystem is actively pursuing initiatives to achieve this. We are also exploring the benefits, risks and operational challenges of introducing a digital euro,” she said. “A digital euro could be a complement to, not a substitute for, cash; it could provide an alternative to private digital currencies and ensure that sovereign money remains at the core of European payment systems.”
Ardoino believes further competition will increase the need for regulatory oversight of the space, which he says will be beneficial for the banking system.
“From an operational point of view, it will simplify the access to the banking system and will make it more streamlined and seamless for the day to day life of our users. Now, the banking system that has shown that it’s really outdated so the digital euro will solve and make our industry much more efficient. We are really, we would be really interested to, to integrate these as soon as it becomes available,” he adds.
“I really hope that these new regulatory frameworks will be a big step forward for the technology layer that has been neglected for years.”
Lagarde also explained that implementing national and European policies was crucial as it would bring change to labour, product, and financial market regulations whilst reducing digital exclusion, but also accelerate the digital single market, which would help provide economies of scale for digital firms and address ongoing data security concerns.
The introduction of digital euro will also reduce payments costs for all market participants, according to Ardoino.
“Digital euro will be used by banks that want to use euro so that the inter banking settlement system, and clearing system can be streamlined, can be made safer, faster, and cheaper. It should reduce the costs of maintaining a global European banking system. The approach of the EU will be gradual as they will clear a layer for banks and then start allowing banks to offer services on top of the digital euro,” he says. “It could reduce the fees that everyone pays when we do any transaction by a credit or via bank wire.”
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