Cryptocurrencies are disrupting the traditional financial ecosystems, forcing central banks around the world to search for ways to keep us with the changing scene, including creating central bank digital currencies (CBDCs).
While some countries are far ahead in their CBDC development projects, others are still exploring the benefits of launching one.
During an interview with Bloomberg on Wednesday, Christine Lagarde, the President of the European Central Bank (ECB), noted that even if the bank decides to roll out a CBDC, a lot of work would be put into it to ensure that it works out and that takes time.
She said, “The whole process, let’s be realistic about it, will in my view, take another four years, maybe a little more but I will hope that we can keep it within four years because it’s a technical endeavor as well as a fundamental change because we need to make sure that we do it right. We owe it to the Europeans, they need to feel safe and secure.”
Lagarde noted that the digital euro, if eventually launched, would be an equivalent of the physical banknotes with the same level of security. She also added that the bank will have to ensure that the launch of a CBDC would not break any existing systems but continue to enhance those systems.
She acknowledged that the pandemic had drastically changed the behavior of people, including their payment methods, indicating that the financial ecosystem is moving into a digital dimension.
Lagarde stated, ” If you just observe how people have behaved during COVID-19… it is moving in a digital dimension, which we should not be afraid of. [It] should provide us safe, solid, and secure payment mechanism to Europeans and others.”
While speaking of countries with accelerated CBDC development projects, Lagarde said that the ECB is paying close attention to the CBDC tests that are currently being run by China and it will, hopefully, gain a few pointers from there.
The Bahamas had launched its CBDC back in December 2019 and has recently partnered with Mastercard to launch its CBDC-linked card, the first of its kind.