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Speaking at a news conference in Frankfurt following her first address as the new president of the European Central Bank (ECB), Christine Lagarde mapped out her plans to steer the bank’s taskforce on a digital currency.
Lagarde, who stated that “central bank digital currency is coming alive” and called for regulatory support of digital currencies during her tenure as head of the International Monetary Fund, believes the ECB should be “ahead of the curve” in using new technologies to advance traditional banking systems and procedures.
Lagarde says that while the mandate of monetary policy is price stability, the timing is now to reexamine how to achieve it.
“I think it is timely, coming to this job new, and it’s just the most appropriate moment to rally support of members around the table to reexamine the effectiveness, appropriateness of each and every single instrument that we’ve used in the past – to take assessment of that. And to then redefine for ourselves what exactly will be this medium-term objective that will deliver on the mandate that we have which is not changing…the mandate is price stability. The way in which we deliver the mandate is the one that will be under the strategic review.”
Adds Lagarde,
“On the digital currency – first of all I would like to pay tribute to somebody who is leaving at the end of the year who has been instrumental at the ECB, and way beyond, to help us understand a bit better and with more clarity the difference between the bitcoins of this world, the stablecoins and the digital currency. By that I mean Benoît Cœuré, who has been a member of the Governing Council, member of the Executive Board of the ECB and who is finishing at the end of this year.”
Lagarde discussed how it’s important to draw the line between the different types of assets and to focus the bank’s efforts.
“The digital currency – we have set up a taskforce and we will accelerate the effort of this taskforce, drawing on the resources of the entire Eurosystem, meaning the national central banks that already participate in that research and that have already committed to the project in terms of experimentation, pilots here and there. So harnessing on all those experiments that have taken place and all the research that has already been put into this effort, together with the work that has been done here also.
I think we’re trying to do that by mid-2020. We will identify, number 1, the purpose that we have with that. Are we trying to reduce costs? Are we trying to cut out the middleman? Are we trying to have inclusive finance at no cost? There’s a whole range of objectives that can be pursued.
So I think we will start by doing that. Then we will identify the technicalities of it all, which is not a given, particularly when you talk about the Eurosystem. And I think that there is also great interest outside of our regional area. I know, for instance, that Canada, the UK, certainly other countries way beyond, are also looking very deeply into that to see if it makes sense, what purpose it serves and how we can best deliver on it.
My personal conviction is that given the developments we’re seeing — not so much in the Bitcoin segment — but in the stablecoin projects — and we only know of one at the moment, but there are others being explored, and underway at the moment, we better be ahead of the curve, if that happens, because there is clearly a demand out there that we have to respond to.”