The heads of the European Central Bank (ECB), the U.S. Federal Reserve, and the U.K.’s central bank announced that they are actively working on exploring the possibilities behind central bank-issued digital currencies (CBDCs) at the annual ECB forum.
Some experts believe that state-run digital currencies may be a pivotal point in the modern economy, as the possible launch of CBDCs may replace private stablecoins like Tether (USDT). However, “getting CBDCs right is more important to being the first,” according to Jerome Powell, chairman of the U.S. Federal Reserve.
“We have been actively participating with Andrew and Christine, and other central banks at the BIS to look at the benefits of CBDC,” Powell stated during the live panel at the ECB forum.
The individuals that Powell mentioned are Andrew Bailey, Governor of the Bank of England, and Christine Lagarde, President of the European Central Bank.
The head of the ECB Christine Lagarde noted that there has been a substantial increase in digital payments in the past 10 years, and further acceleration due to the COVID-19 virus outbreak.
“A lot of digital payments are accelerating, pushing us in the direction of exploring alternative modes of payments, and there will be a transformation that will be beneficial,” Lagarde stated.
However, Lagarde’s focus is to launch CBDCs as a solution to the “quite laborious” cross-border payments, which can be made “faster, cheaper, and secure.” Powell, on the other hand, focused his attention on maintaining the U.S. dollar’s position as a primary reserve currency worldwide.
Andrew Bailey was more radical, stating that CBDCs would ultimately replace private stablecoin projects like Facebook’s Libra and Tether’s USDT, as people would be more confident about depositing their funds in a state-run digital currency.
The ECB is currently leading the CBDC efforts with Lagarde, confirming her past statement that a CBDC “has to complement, not substitute fiat currencies.” Also, the ECB called for public comments on its CBDC plans in October, with a deadline set to mid-January 2021. Lagarde, however, noted that despite the optimism, CBDC development and launch would take “two, three, or even four years.”
Lagarde cited several examples about CBDC development with one of the most prominent cases being China’s DC/EP stablecoin, which took five years to develop, and Facebook’s Libra stablecoin, which is now four years in the making.