Christine Lagarde, president of the European Central Bank (ECB), said that by failing to adopt central bank digital currencies (CBDCs), Central Banks might lose their relevance.
Commercial banks perceive Central Banks as monetary anchors, thus Central banks should direct and then keep up with the financial sector advancements, including such as CBDCs — reasoned Lagarde.
“Where do we stand, we Central Bankers? We have been operating as a monetary anchor in relation to Commercial Banks and private money. If we are not in that game, if we are not involved in experimenting and innovating in terms of digital central bank money, we risk losing the role of anchor that we have played for many, many decades.”
Lagarde also reviewed the historical periods where Central Banks were not present as an “anchor” which could support, which led to “crisis after crisis.”
“Do we want to go back to those days? Probably not… As a result of which, we have to respond to the demand for those digital payments in order to maintain the role of anchor that we have been playing regularly.”
Fabio Panetta, ECB’s Executive Board member, wrote an article earlier in January, which Lagarde recently revisited. In the article, Panetta mentioned the role of Central Banks as anchors, as well as the need for digital currencies and the adoption of CBDC.
As the EU is slowly progressing toward the initiation of the union-wide CBDC program, many countries across the world have already begun doing so, and some have already adopted CBDC. China, for example, released its Digital Yuan in early 2022 as a test in the 26 provinces, which soon enough proved to be extremely successful. On the other hand, Nigeria came out with the most unpopular CBDC project. Its e-Naira was launched in October 2021 and 99% of the population refused to adopt it.
At last, countries like India, Russia, the UK, Japan, Mexico, Australia, and a few others, have already launched or have a plan for the launch of their own CBDC projects, with companies like Visa, supporting the progress.