- A report titled “The international role of the Euro” was released by the European Central Bank.
- It discussed how certain countries with no CBDC plans are at risk.
There are plenty of fears of banks when it comes to crypto. The possibility of waking up to new rules imposed by banks on their customers is very much valid. Recently, a report was released by the European Central Bank which was named “The international role of the Euro” by the bank itself. The report laid emphasis on the critical analysis of the cryptocurrency growth and of course, the result of the absence of Central Backed Digital Currencies Or CBDCs. The CBDC is controlled by the government and banks of a country.
Potential harms of CBDC absence?
According to the report by the European Central Bank, if a country does not release its own CBDC, there are a number of harmful implications that could ensue. The CBDC is the responsibility of the central bank of a nation and the EBC believes it might be important to have one. The report said that it would be easier to maintain the integrity and the structure of the domestic payment system in the country along with the security of the international payments that are made on a daily basis.
The Central Bank Digital Currencies are those crypto tokens that are controlled by the bank, i.e., they are not decentralized. As pointed out by the European Central Bank, situations can arise in such countries wherein foreign companies like Facebook that introduced Libra, etc can introduce their own tokens. These tokens might become the sole method of exchange in such countries.
Thus according to ECB, it would be in the favor of the respective country to launch a CBDC such that they are able to maintain their autonomy and can keep a check on the power of such multi-national entities within their country.
The usage of privately-owned coins will threaten the stability of the market and the businesses in the country will get subdued due to the power of such privately controlled coins.
The discussion arose when the bank in association with the European Commission decided to launch a digital Euro that will be the same as the Euro but in the form of a cryptocurrency. There can be multiple benefits of such a Euro and as of now, it can take about 4 years to launch as President Christine Lagarde confirmed in the month of March.
Although the presence of Central Bank Digital Currencies does appear to be quite beneficial for countries that have a weak and unstable fiat currency, it is important that every country brings out their version of digital currency for their own good and also, “reduce monetary policy autonomy in the economies concerned.”