European Central Bank thinks digital euro can address concerns with ‘artificial currencies’

According to the European Central Bank, a CBDC or digital euro might be needed in order to combat “artificial currencies” that now dominate cross-border payments.

In “The International Role of the Euro,” The central bank’s annual review of the fiat currency, economists Massimo Ferrari and Arnaud Mehl raised their worries regarding the rise of the so-called artificial currencies, being led by an unnamed “foreign tech giant,“ possibly referring to the Diem project of Facebook.

The duo said, “One concern could be a situation in which domestic and cross-border payments are dominated by non-domestic providers, including foreign tech giants,” adding there is a possibility that these providers will offer bogus currencies in the future.

Worries about stablecoins or artificial currencies

Ferrari and Mehl also said that the presence and dominance of stablecoins won’t just threaten the financial system’s stability, but would also make individuals and merchants vulnerable to a small number of dominant providers with strong market power.

The ECB, for a long time now, has repeatedly expressed its concerns about the rise of these phony currencies. The financial institution even resorted to asking European Union lawmakers for veto powers against private stable projects like Facebook’s Diem coin.

The economists presented several scenarios suggesting a digital euro might be very important in addressing the current issue at hand.

Digital euro as a promising way out

Bundling a digital euro with complementary services, according to the duo, might just be enough to compete with big tech firms for payment products and services.

Moreover, deploying the virtual asset might also be a prerequisite for the enhancement of the current cross-border payment infrastructures. Experts suggest that it could eliminate the need to leverage foreign currencies for international transactions, reducing costs while facilitating an expansion of global e-commerce.

 

Image courtesy of Cointelegraph News/YouTube

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