Friday, December 3

ECB must prepare to issue a digital euro, Panetta says

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A main concern is that this form of money might displace traditional deposits, hollowing out commercial banks, particularly at times of financial crisis, and crowding out private solutions.

In the study, the ECB said deposits in digital euros would probably be capped and subject at least in part to the ECB’s interest rate on deposits, currently minus 0.5%.

They would ideally be offered by the private sector, rather than just by the ECB itself, it said.

Facebook’s announcement last year that it would offer its own token, backed by official currencies, made central banks worry they would lose control over money and triggered a number of competing initiatives.

Sweden’s Riksbank has been testing its e-krona for months and the People’s Bank of China is also running a trial on a ride-hailing platform.

But cash use is still prevalent in Germany and other euro zone countries, meaning a prospective central bank digital currency may have less appeal in the euro zone.

The US Federal Reserve, the Bank of Japan and the Bank of England have all struck a cautious tone regarding the possible introduction of digital currencies by central banks.

Following intense regulatory backlash, Facebook scaled back its Libra plans. It will now be linked to individual national currencies, rather than a basket of them, and overseen by global watchdogs. (Reporting By Francesco Canepa; editing by Balazs Koranyi, Larry King)