European Central Bank President Says The Bank Has No Plans To Issue Virtual Currency

Mario Draghi, the president of the European Central Bank (ECB), has announced that the financial institution has no plans on issuing a virtual currency backed by the central bank report Reuters.

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Mario Draghi, the president of the European Central Bank (ECB), has announced that the financial institution has no plans on issuing a virtual currency backed by the central bank report Reuters.

No need for a virtual euro token

In a letter addressed to the Europe Parliament on Wednesday, September 12, Mario Draghi explained that the ECB has no plans of issuing its own virtual currency.

“The ECB and the Eurosystem currently have no plans to issue a central bank digital currency. Nonetheless, we are carefully analyzing the potential consequences of issuing such a currency as a complement to cash.”

Mario Draghi stated that a lack of robustness in the underlying blockchain technology, as well as the large quantities of physical cash in use across the EU, means that the option is not under consideration by the union.

Draghi further stated that the adoption of cryptocurrencies in microeconomic operations could create an unnecessary and harmful competition, which he believes could significantly increase risks and operational costs.

Central banks don’t need virtual currencies

Although Mario Draghi and the ECB consider the distributed ledger technology immature to handle large-scale real-world application, central banks of many countries are considering moving to launch a national cryptocurrency.

Countries such as Norway, China amongst others have increased their studies into cryptocurrencies and the underlying blockchain technology in order to launch a national cryptocurrency.

Draghi explained in his letter that the distributed ledger technology would require substantial improvement before the technology can find its way into central banks.

Mario Draghi wrote:

 “There are several reasons why we do not consider issuing a central bank digital currency to be a concrete option for the near future. First, the technologies which could potentially be used to issue a central bank digital currency, such as distributed ledgers, have not yet been thoroughly tested and require substantial further development before they could be used in a central bank context.”

In contrast to the report, the central bank of Sweden is considering issuing an electronic version of its currency (e-krona) as a response to the drastic reduction in the use of fiat notes and a rise in the use of electronic payments.

Fiat still leads other methods of payment in Europe

Since the inception of cryptocurrencies, many have argued that the technology would actively replace traditional payment options.

This argument persists largely because of the advantages of instant transactions, cross-border payments, and almost negligible transaction fees.

However, a research conducted by the European Central Bank in 2017, discovered that fiat cash still leads other payment methods, constituting 78.8 percent of all payments at points of sale across the EU.

According to the research, credit and debit cards payments consist of 19.1 percent of all payments in Europe while the remaining 2.1 percent arises from other payment instruments including cryptocurrencies.

The finding of ECB seems to challenge the perception that cash is rapidly being replaced by cashless means of payment.

Cryptocurrencies argue that the technology has revolutionized the traditional fiat system, however, the stability and global acceptance of fiat money constitutes its greatest advantage over cryptocurrencies.

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