Digital Euro Could “Complement” Cash – Christine Lagarde

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  • A digital euro will not replace cash, says European Central Bank president Christine Lagarde
  • ECB needs to balance benefits of digitization with existing social divisions
  • Advice comes after China declared that CBDCs will form “new battleground” in finance

Christine Lagarde, the President of the European Central Bank (ECB), has said that any digital euro stablecoin would not seek to replace cash but would operate alongside it. Speaking at a virtual meeting of the Franco-German Parliamentary Assembly on Monday, Lagarde stated that the ECB was exploring “the benefits, risks and operational challenges” of a central bank digital currency (CBDC), in the wake of China’s declaration that the new financial paradigm represented a “new battlefield” between nations.

Digital Euro to “Fully Reap” Potential of Fintech Developments

In a post on the ECB website following the talk, Lagarde stated that the ECB needed to “fully reap the potential gains from digital technologies” but that too rapid adoption threatened to increase social divisions already present in the bloc.

Lagarde also touched upon the concept of an ECB digital currency, framing the development in terms of the existing system:

We are also exploring the benefits, risks and operational challenges of introducing a digital euro. 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.

Digital Yuan Could Force Nations’ Hands

Lagarde has long been a supporter of blockchain technology and how it can improve a decades-old financial system that struggles to cope with the demands of the modern day. Countries within the Euro zone such as Germany, France, and Italy have all made positive noises towards the implementation of internal stablecoins, almost forcing the hand of the ECB.

Lagarde’s comments on a potential digital euro come in the wake of China publicizing a desire for their forthcoming digital yuan to reduce their exposure to the traditional dollar system, claiming that the CBDC race represents a “new battlefield” in the war over the future of finance.