Europe’s “highly efficient” payment systems leave space to address social and financial concerns of a central bank digital currency, Pablo Hernández de Cos said.
Reservations about a potential digital euro – some of which have veered toward conspiracy theory territory – show there is no pressing need for one in the European Union, Bank of Spain Governor Pablo Hernández de Cos said during a Monday speech.
Although the European Central Bank’s digital euro project is important, the European and Spanish payment systems are “highly efficient,” and so central bankers are “pushing ahead with our analysis with the utmost caution,” he said.
The ECB’s central bank digital currency (CBDC) project, exploring the issuance of a digital version of the euro for retail payments, took off at great speed but slowed with legislative proposals earlier this year, and central bankers face political opposition. Criticism included legitimate concerns about privacy and spiraled into conspiracy theories about a digital euro playing a part in a plan to widen state control.
A CBDC should be designed to mitigate any risk to financial stability and monetary policy, Hernández de Cos said.
“I am fully aware that, in its current state, this initiative raises many questions both for society in general and for the financial industry … In these circumstances, issuing a digital euro is not naturally perceived to be a pressing need,” he said.
That doesn’t mean work on a digital euro should stop, the governor said. In November, the project entered a “preparation phase,” during which the ECB will finalize a rulebook and select providers to develop a platform to run tests.
“I believe it is our responsibility – not only the central bank’s, but also the financial industry’s – to be ready to ensure that a service which is key to society’s well-being, as the payment system is, does not come under threat. Therefore, and irrespective of the decision which is ultimately made, I believe that all the Eurosystem’s past and future efforts are fully warranted,” Hernández de Cos said.
ECB Chief Christine Lagarde said in September that a digital euro is at least two years away.