Crypto News

European Central Bank President Envisions Direct Digital Currency Use

Christine Lagarde digital currency ECB

The European Central Bank is exploring the potential for a digital currency, which would allow direct injections of liquidity to consumers, said Christine Lagarde, the bank’s new president.

Digital Currency Optimism from IMF to ECB

In her first hearing before the European Parliament as the head of the ECB, Lagarde continued spreading the message that central banks may adopt a digital currency. Lagarde has been friendly to the idea of digital currency during her mandate as head of the IMF, and will bring this attitude to the ECB.

Still, Lagarde’s position was tentative, stating that direct liquidity injections may pose risks.

A central bank digital currency would allow citizens to use central bank money directly in their daily transactions. However, depending on its design, a central bank digital currency could pose risks. For instance, they could alter the way in which monetary policy is conducted and transmitted to the real economy

The ECB has a mandate to keep up liquidity, while curbing inflation to a predetermined 2% rate. To achieve this, the bank lends liquidity to commercial banks, while also setting a base interest rate. The injection of liquidity uses legacy electronic systems, and the money then trickles down to the economy and consumers through lending and other commercial bank activities.

The central bank is also a lender of last resort, supporting the solvency of banks. But a digital currency may be accessible directly to consumers, Lagarde suggested. So far, this approach to guiding the economy has not been tested, and is only hypothetical.

ECB Still Skeptical of Bitcoin

The ECB has tested blockchain and even Bitcoin (BTC) in the past, concluding the speed and scale of the system are not sufficient to carry the transactions at the scale of the global financial system. However, the bank has also worked on its own blockchain solution, or another form of a centralized digital currency.

Lagarde avoided using the term “cryptocurrency”, making a distinction between digital assets and a currency. Most crypto supporters see the meaning of BTC and other coins as lying in their fixed supply and low inflation. The idea of BTC is actually counter to having a flexible monetary policy, which uses money as a tool to stimulate or pull back the economic activity. BTC is aiming to work as “sound money”, in a world which is used to liquidity injections and an agile money supply.

The ECB now supports rock-bottom and even negative interest rates, in a bid to avoid a recession and a liquidity panic. The marginal lending facility rate is 0.25%, with refinancing operations at 0% interest rate.

What do you think about ECB’s mandate and the usage of digital currency? Share your thoughts in the comments section below!

Images via Shutterstock

The post European Central Bank President Envisions Direct Digital Currency Use appeared first on

How useful was this post?

Click on a star to rate it!

As you found this post useful...

Follow us on social media!

Related Crypto News

Bitfinex Offers Up to $400M For Information Leading to BTC Stolen in 2016
Bitfinex wants to recover Bitcoin stolen from them in 2016, even if that means paying to find the hackers...
Tracing Fishy Risks With Blockchain Tech Amid the COVID-19 Pandemic
The COVID-19 pandemic has highlighted challenges in global seafood supply chains, and blockchain tech may help improve them. COVID-19...
Chainlink Reaches New LINK Price All-Time High Eyeing $10 Next
The price of Chainlink has climbed to new heights as LINK continues to be one of the strongest cryptocurrency...
HaruBank Celebrates One Year of Operations, Showing Strong Growth
Bitcoin Press Release: Blockchain-based digital asset depository service HaruBank celebrates 1 year of giving users market-leading interest rates, with transacted volumes of over...
From Broke To Bitcoin: The Post-Pandemic Rags To Riches Story
The pandemic has brought about tough times on many. The economy is struggling, jobless claims are rocketing, yet thanks...
Sceptre Monitor Review – 27″ Curved Gaming Monitor (C275B-144RN)
Note: This review is in no way sponsored by Sceptre. I had no contact with the company and bought...

Featured Crypto News

Bitcoin Price Climbs to $11,200, But Three Factors Hint at a Pullback
The price of Bitcoin spikes to $11,200 but three key factors suggest that a short-term pullback is likely as...
Bitcoin Could Hit $12K on Ethereum-Tailing Behaviour: Analyst
Bitcoin is eyeing a breakout towards $12,000, according to crypto-chart analyst Josh Rager. The analogy appears out of Ethereum’s...
Unexpected Factor That Suppressed Bitcoin Bulls in 2019 Is Now Gone
If you’ve been involved in the Bitcoin market over the past year, you know of PlusToken. PlusToken was a...
Ether Rockets 50% in 5-Year Anniversary Month: What’s Behind the Rally?
As Ethereum turns five years old, Ether is up 50% over the past month with two main catalysts driving...
This Simple Bullish Pattern Suggest Ripple (XRP) Could Surge Above $0.25
Ripple is up over 2% and it is showing positive signs above the $0.2400 resistance zone against the US...
Will Ethereum Overtake Bitcoin as the World’s Leading Token?
Ever since it was first released to the public in January 2009, Bitcoin has been the leading player in...