European Central Bank: There are no plans to issue digital currencies

The president of the European Central Bank, Mario Draghi, has announced that the bank has no plans to issue a digital currency. One of the reasons is that there would be no need for such a means of payment.

Draghi describes the views of the ECB and the Eurosystem in a letter. In it, he puts forward several reasons why digital currencies are not part of the central bank’s plans. First, the underlying technique, in which he cites distributed ledgers as an example, has not been sufficiently tested. In addition, considerably more development would be required before it could be used by a central bank. Second, there would be no concrete need for a digital currency, with Draghi pointing out that there are other electronic alternatives. In addition, cash would still be popular and the demand for bills would increase.

In the letter, he also points out that the central bank would compete with other banks if it started offering accounts to households and businesses. However, Draghi notes that the ECB is “analysing the potential consequences of issuing a digital currency,” closely monitoring the activities of other central banks. Finally, he talks about the possible costs and benefits of such a project.

He considers the advantages that a digital currency can ‘meet the demands of security and the digitization of the economy’. On the other hand, there could be consequences for the role of banks, with Draghi referring to the degree of intermediation and leverage in the banking system. There are banks that are considering introducing a digital currency, for example the Swedish Riksbank. That bank wants to conclude an investigation in 2019 into the question of whether the so-called e-krona can serve as a supplement to cash and what is needed for this.