At a panel hosed by the International Monetary Fund earlier this week, Federal Reserve Chair Jerome Powell said that 80% of central banks around the world are exploring the idea of issuing central bank digital currency (CBDC), although the U.S. Fed has not made a decision to follow suit at this time.
Powell’s statement echoes a research report released by the Bank for International Settlements (BIS) in January which stated that currently 80% of central banks are engaged in developing in CBDC, up from 70% last year.
Earlier in October, the ECB has issued statements saying that it is considering using a digital euro to supplement a cash-based euro.
“A digital euro would preserve the benefits that the euro provides to all of us. It would help to deal with situations in which people no longer prefer cash,” the ECB said in a written statement on their website. “It would help cushion the impact of extreme events – such as natural disasters or pandemics – when traditional payment services may no longer function. It could also be crucial if people were to turn to foreign digital means of payment, which might undermine financial stability and monetary sovereignty in the euro area.”
Fabio Panetta, Member of the Executive Board of the ECB, wrote in a blog post that central banks, including the ECB, should be prepared to adapt to a cashless system, which is the direction that society is headed.
“The report concludes that we should be ready to issue a digital euro if and when developments around us make it necessary. This means that we already need to be preparing for it. In the coming months, we will listen and experiment so that we are in a position to take a fully informed decision on the possible development and launch of a digital euro,” Panetta said.
David Erfle, founder of JuniorMining.com, said that the ECB has no choice but to issue digital, or alternative currencies, because there is still a large amount of debt in the Euro Area that needs to be consolidated.
“I just know that the financial situation that they find themselves in as far as debt is concerned, leaves them no choice,” he said. “Now, they’re basically forced to, because they realize that there’s no possible way that governments of these major economies can continue to borrow at these ridiculously low levels of interest rates, but the greater problem is that all the past debt cannot be continuously rolled over because there’s no buyers.”
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