Thursday 25 March 2021 10:41 am

ECB eases digital euro doubts and backs proposed currency to thrive

The European Central Bank today eased doubts in Germany about the launch of a digital euro, insisting that the electronic cash would not be used to penalise savers or upend banks.

The ECB is looking to launch a digital version of the euro within the next five years to see off competition from cryptocurrencies such as Bitcoin.

However, the bank has received a backlash in Germany, where its main shareholder, the Bundesbank, has been unenthused by the project.

‘Catastrophic’ for savers

Popular German magazine Focus wrote that a digital euro would be “catastrophic” for savers.

ECB board member Fabio Panetta and official Ulrich Bindseil said the currency would not replace physical cash.

“The ECB is by no means planning to use a digital euro to enforce interest rates that are significantly more negative,” the duo wrote in an article.

“As long as there is cash, it will always be able to be held at an interest rate of zero percent.”

Bundesbank unenthused

Bundesbank officials have stressed that a digital euro could pose risks to banks and should be studied at length before any decision is made.

But the two ECB officials said the digital euro could be designed so that it doesn’t compete with bank deposits, adding that it would ensure the euro zone’s independence from foreign powers.

“We have to prevent European payment transactions from being dominated by providers outside Europe, such as global technology giants who will offer art currencies in the future,” Panetta and Bindseil wrote.

“By preparing for a digital euro, we are also securing the autonomy of Europe. It is a safeguard in the event that undesirable scenarios occur.”