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The EU’s central bank digital currency (CBDC) project may land quicker than the market is anticipating, but is politics driving the desire for a retail version?
The digital euro is well into its investigatory phase now, and many industry and regulators alike believe it is likely that the European Central Bank (ECB) will issue one eventually — even if it has not yet formally made such an announcement.
Yet, with the likes of China rapidly advancing to a full rollout, and other economies such as Nigeria having already done so, some suggest that such an announcement may not be that far away.
“This is going to be happening much faster than people in the industry perceive,” said Adam Gagen, global government affairs head at Revolut, who added that it is something that will change the lives of businesses and consumers once it is released.
Gagen was speaking at a Money 20/20 panel event, which has been taking place in Amsterdam.
He pointed to China in particular as a reason why growth will be fast.
“We are excited to see what we can do collectively throughout Europe to make sure that this is a success and is fixing problems,” he said.
Others on the panel took a different view to Gagen, however.
“We seem to still be quite far away from understanding how we will deliver on it,” said Henrik Gebbing, founder of crypto platform Finoa.
Gebbing continued to state that he ponders on what problems it will actually solve for consumers. “If it is literally just a different line in my deposit account, in my current account, that doesn’t really help me.”
Dutch central banker Inge van Dijk was in agreement, and was sceptical about whether there will be a digital euro in the next five years.
Rather the ECB should concentrate on getting it right, rather than getting it out, she said.
Van Dijk did, however, note that a retail CBDC could be beneficial for fixing some of Europe’s current payments pangs.
For example, it could help solve the de-risking issue, considering that access to bank accounts has been an ongoing problem for various citizens and particularly those who are vulnerable, such as refugees.
Gagen, meanwhile, stated that central banks in the EU may not be that enthusiastic about the prospect of a retail CBDC being issued.
“In reality, off the record when you talk to central banks, the people working at them say it would make more sense to have a wholesale one, but that it is political pressure,” he pointed out. “We have something that is being built that is being driven by politics and technology.”
Van Dijk similarly suggested there was an impetus on the EU’s authorities to intervene.
“There hasn’t been a pan-EU solution provided by the market. Ten years ago, we had Project Monnet and now we have the EPI (European Payment Initiative). I hope that the EPI gets it together, but if not, we need something else.”
Martina Weimert, the chief executive of the EPI, had her own views on the digital euro. Speaking at a different panel event at Money 2020, she said that a digital euro is not a “payment solution”.
“It is a currency, and doesn’t mean anything,” she argued.
