In an interesting Twitter thread over the weekend, President of the European Central Bank Christine Lagarde discussed how bank policy could help in the fight against climate change, the impact of coronavirus and the response to it from the ECB, and how the modern lifestyle of Europeans may be positively enhanced moving forward with cryptocurrencies.
“As Europeans are increasingly turning to digital in the ways they spend, save and invest, we should be prepared to issue a digital euro, if needed,” Lagarde tweeted on Sunday evening.
RBA Forms Partnerships to Research CBDC
It is not only Lagarde and the ECB who have CBDCs at the forefront of their mind right now. The Reserve Bank of Australia (RBA) has announced that it is currently looking into the potential benefits of a wholesale central bank digital currency alongside three other firms.
Perpetual and ConsenSys are among the companies the RBA is working closely with, as well as two of its existing partners, National Australia Bank and the Commonwealth.
The RBA appears to have had a change of heart over central bank digital currency,having declared as recently as early September that it was skeptical of CBDCs and that there was “no strong policy case for its issuance.”
The recently announced project, however, with the primary purpose of exploring the development of a POC (proof-of-concept) for the “issuance of a tokenized form of CBDC” will be completed by the end of 2020 with a detailed report outlining the findings published in early 2021.
As well as examining the possibility of using a CBDC as funding, settlement, and repayment of a tokenized syndicated loan on an Ethereum-based DLT platform, they intimated that the project will probe the development of a POC.
The Tortoise Wins the Race for the US
Interestingly, the United States has been resolute that they will not be issuing a digital dollar until the Federal Reserve resolves all unanswered questions around what is now likely to be a central bank digital currency. The Fed’s chairman Jerome Powell stated back in September that the U.S. was focused on getting this right as opposed to being first and there has been nothing since that statement to suggest that their stance has changed. The US seems unfazed by the prospect of other countries having first-mover advantage when it comes to issuing CBDCs.
There are certainly arguments for and against issuing a CBDC, but what is certain is that there will not be a ‘one size fits all’ CBDC. The development of CBDCs is an intricate process involving many parties, and the cooperation and coordination of all major players is paramount. This will prevent negative international spillovers while at the same time ensuring that long overdue improvements to cross-border payments are not neglected.