The European Central Bank (ECB) said that the transition to the state digital currency will reduce the risks to the financial system.
According to a working paper aimed at identifying issues and reaching consensus on a state-owned cryptocurrency (CBDC), the introduction of a CB digital currency appears to be “the only solution” that guarantees a “smooth continuation” of the current monetary system.
“The introduction of a CBDC is the only solution to ensure the smooth continuation of the current monetary system as physical money loses its economic viability and major digital platform cryptocurrencies continue to flood the market,” the document says.
The ECB noted that interest in the “economics of money and payments” has increased dramatically over the past 15 years and has gone beyond the narrow academic circle. Therefore, society needs to provide such a tool as the digital currency of the Central Bank, while solving all privacy problems.
“While consumers place a high value on privacy in surveys, in practice they tend to give away their data for free or in exchange for very little reward,” the statement said.
The authors identify privacy as an area requiring more research, as do end-user preferences for the development of CBR digital currency features. The document also dismissed concerns that the Central Bank’s digital currencies could lead to a reduction in the loan offer.
Earlier this month, Europe’s top financial regulator compared central bank digital currencies to bitcoin, saying the latter was too complex and costly to calculate.