Central Bank Digital Currencies (CBDCs) may soon become legal tenders in their jurisdictions as planned by major central banks in Europe as officials are currently studying such initiatives.
On Tuesday, November 9, while speaking in a panel in Helsinki on Central Bank Digital Currencies (CBDCs), Fabio Panetta, European Central Bank (ECB) executive board member, announced that the outcome may likely be in euro areas.
Panetta explained that such status should not be taken for granted – CBDCs being legal tenders would give them an edge over other payment options offered by private firms and help achieve broader use by the public.
“It would be quite awkward not to have a legal-tender status for an additional instrument issued by a central bank,” Panetta said.
Panetta stated that the ECB will examine the issue over the next two years.
Meanwhile, Russian Central Bank Governor Elvira Nabiullina emphasized the importance of seamless conversion between forms of money and stated the importance of the trust that society would have in digital money.
Experts believe that consumers may shun using CBDCs if they stick with payment methods such as credit cards and apps or embrace newer options like stablecoins.
The ECB is currently conducting its study, which is examining the possibility of giving a digital euro a legal tender status as one of the major areas for investigations.
Other areas that the study is examining include interaction with the European retail payments markets, use cases, design choices, and what front and back-end technical infrastructure could best handle such issues.
Towards A Digital Euro
Digital currencies are not a new phenomenon. With the decrease in cash payments and the increasing use of cryptocurrencies, the question of future payments has been frequently discussed. As a result, many central banks are willing to introduce such a currency.
As reported by Blockchain.News in July, the Governing Council of The European Central Bank launched a test phase on a digital euro project to start preparing for the future even though there is still a long way to go before digital currencies start appearing in digital wallets.
The ECB emphasized that a final decision has yet to be made on whether a digital euro would actually be adopted. The issues surrounding CBDCs and the several options available in their development are complex and require careful thinking. So, it is no big surprise that the EU plans to take five years to work it through.