According to the Dutch central bank, the Netherlands is well placed on developing and testing a digital euro. Progress with Libra has prompted regulators to tackle the threats of private money.
22 April, 2020 | AtoZ Markets – In Europe, the development of a digital euro has become a hot topic of discussion among central banks, but none has moved in this direction. The Dutch central bank desires to be the testing ground for central bank digital currencies (CBDCs) in the European Union.
Netherlands Would Be a Suitable Testing Ground for a Digital Euro
Dutch central bank, De Nederlandsche Bank (DNB) has committed to introducing the digital euro, becoming the first monetary regulator in the Eurozone to start developing a CBDC. In a 45-page report, the DNB stated that it was “ready to play a leading role” in the research and development of Digital Euro.
“If the decision were to experiment with a concrete type of CBDC, Netherlands is ready to play a leading role. Moreover, the Netherlands is an appropriate testing ground for such an experiment”, said the central bank.
A digital euro should make cross-border payments faster and cheaper for all participating Member States. The Netherlands would be an appropriate testing ground, the report said.
The 45-page report also mentions threats to fiat by digital currencies, especially the Libra offered by Facebook. However, the regulator believes that “private digital money” like Libra can fill this cashless gap unless the regulator offers a digital alternative to public money.
According to the report, this development is partly due to the decrease in the use of paper money and coins in the Netherlands. Almost two-thirds of all payments in the country are digital. The DNB report wonders in developing a digital currency “whether central banks should provide a new type of currency better suited to the needs of citizens and businesses”.
Digital Solutions for the Pandemic
Pandemic measures have shut down many businesses around the world. The DNB report notes that those that remain open avoid physical cashing. Many stores are now asking their customers not to pay cash, which means that only private money is accepted. As the money we use becomes riskier both physically due to the risk of COVID-19 and financially due to an uncertain economic future. The race for CBDCs is accelerating.
European regulators are still examining the prospect of the digital currency. But their counterparts in Sweden and South Korea are already testing CBDCs. However, the two central banks have made it clear that they are only experimenting with the concept. They have made no decisions about launching such digital fiats.
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