ECB Official Says Digital Currency Could Be an Alternative to Cash

A digital currency could ensure that citizens remain able to use central bank money even if cash is eventually no longer used, a European central banker said. 

Speaking at a joint conference held by the European Central Bank and the National Bank of Belgium, outgoing executive board member Benoît Cœuré said the bank will examine the potential influences of digital currencies over the existing financial system. 

“A digital currency of this sort could take a variety of forms, the benefits and costs of which the ECB and other central banks are currently investigating, being mindful of their broader consequences on financial intermediation.” Cœuré said. 

However, he advocated for private companies to continue their own work in the space.

“But potential central bank initiatives should not discourage or crowd out private market-led solutions for fast and efficient retail payments in the euro area,” he said.

The speech came on the heels of Cœuré’s appointment as head of the newly established Innovation Hub at the Bank for International Settlements this month. 

Effective on Jan. 1 2020, he will lead the institution’s effort to help central banks explore the benefits of financial technologies such as a digital currency. 

European central banks in general have been speaking out about cryptocurrencies recently.

French central bank first deputy governor Denis Beau said last week the eurozone would consider building a blockchain-based settlement system for the euro and potential a digital currency to address payment issues between institutions in the area. 

However, the ECB has struck down a proposed cryptocurrency proposed by Estonia in September 2017, stressing the euro is the only valid money in the European area. 

Senior officials from the bank also said in the past that they do not consider digital currencies such as bitcoin to be a threat and cryptocurrencies do not pose risks on financial risks on financial stability. 

In this vein, Cœuré said, the bank is not “ignoring” the development of cryptocurrencies, but simply does not think it as a risk to the bank of the euro.