European Central Bank’s (ECB) president Christine Lagarde said that Central Banks might lose relevancy if they fail to adopt central bank digital currencies (CDBC), according to a clip shared by Twitter news outlet Radar.
ECB on CBDCs
Lagarde reasoned that Central Banks are perceived as “monetary anchors” by commercial banks, which mandates them to stay relevant in the newly unfolding financial setting — including CBDCs.
“Where do we stand, we Central Bankers? We have been operating as a monetary anchor in relation to Commercial Banks and private money. If we are not in that game, if we are not involved in experimenting and innovating in terms of digital central bank money, we risk losing the role of anchor that we have played for many, many decades.”
She also reminded viewers that there were episodes in history where a Central Bank wasn’t available as sturdy as an “anchor,” which “precipitated crisis after crisis.”
“Do we want to go back to those days? Probably not… As a result of which, we have to respond to the demand for those digital payments in order to maintain the role of anchor that we have been playing regularly.”
Lagarde’s statements are a repetition of ECB’s Executive Board member Fabio Panetta’s written words published in January. In his article, Panetta reminded the need for crypto regulations and CBDC adoption — where he also mentioned the anchoring role of Central Banks.
CBDCs in the world
While the EU has yet to initiate a union-wide CBDC program, most of the world has already dipped their toes into the CBDC field.
One of the most successful CBDC projects belongs to China — which is surprising considering the country’s anti-crypto stance. Regardless, China launched the pilot phase of its Digital Yuan in the first week of 2022, and it remains in its pilot phase in 26 Chinese provinces. Despite still being a pilot application, China’s most popular social networking application demonstrates the success of the digital yuan as it started accepting payments in CBDC earlier this month.
Contrasting China’s success, Nigeria came forward with one of the most unpopular CBDC projects. The country launched its e-Naira in October 2021, but over 99% of Nigerians have refused to adopt it.
In the meantime, a considerable number of countries in the world, like India, Russia, Australia, Sweden, Japan, Brazil, and Mexico, are either planning to launch or have already launched their own CBDC projects.
Major payment companies have also noticed the hype around CBDCs. For example, Visa recently disclosed that it believes CBDCs and stablecoins will play an essential role in the future of finance. Therefore, it is preparing by already working on a number of CBDC and stablecoin initiatives.
Finally, speculations about the recent banking turmoil in the US have brought the CBDC hype to another level. Some claimed that the banking turmoil was created purposely to strengthen the political case for CBDCs.
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