In a recent clip shared by a Twitter news outlet, Christine Lagarde, president of the European Central Bank (ECB), can be heard saying that central banks might lose relevance if they fail to adopt central bank digital currencies (CDBC).
Explaining her comment, Lagarde said that central banks are comprehended as “monetary anchors” by commercial banks. This role mandates them to stay relevant in the newly unfolding financial setting — including CBDCs. Quoting her:
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.
Referring to a few examples from the past, Lagarde tried to remind the viewers of the instances in history where a central bank wasn’t able to fulfill its responsibility as an “anchor,” which “precipitated crisis after crisis.” She stated:
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.
However, this is not the first time the ECB members have given out such a comment. The president’s recent statements are a repetition of ECB’s Executive Board member Fabio Panetta’s written words published in January. In his article, Panetta highlighted the dire need for crypto regulations and CBDC adoption. He also mentioned the pivotal role that the central banks have to play.
According to a document published by the European Central Bank (ECB) on its website in February, a digital Euro should prioritize online purchases and making payments among friends. The document featured a slideshow presentation from the board’s recent meeting. While the EU is yet to initiate a region-wide CBDC program, most countries across the globe have already started their CBDC journey.
Amongst the nations advancing their CBDC plans, China has been leading the race at the foot front. It launched the pilot phase of the Chinese CBDC more than a year ago and is said to be in its pilot phase in about 26 Chinese provinces.
Several Chinese payment applications have also integrated the CBDC adoption into their platforms to facilitate the CBDC adoption. Additionally, Chinese authorities announced huge giveaways to drive the adoption and promote the usage among the masses.
However, the scene with CBDCs is not the same everywhere. In Nigeria, an African nation CBDC project is anticipated to be one of the most unpopular CBDC projects. The country launched its e-Naira in October 2021, but over 99% of Nigerians have refused to adopt it.
In the case of the United States, lawmakers have expressed their concerns regarding privacy in the digital Dollar. Simultaneously, several countries across the globe like India, Pakistan, Australia, Japan, Brazil, and Sweden, are either planning to launch or have already launched their own CBDC projects and are currently in the pilot or testing phases.
The fame of CBDCs also received noteworthy attention from international entities like the Bank of International Settlements and SWIFT. Both agencies are developing platforms to facilitate users’ experience with CBDCs.