- The adoption of the digital euro is proving to be difficult after setbacks in the crypto market.
- It aims to be a digital currency capable of uniting Europe and the rest of the world.
- Demerits outweigh the benefits of the digital euro, making it difficult to phase out the fiat currency.
The European Central Bank (ECB) initiated the digital euro project in 2020, but it is proving difficult to integrate into society. This enables people to store digital euros at the central bank and has the same characteristics as fiat currency.
In addition, lower fees, greater availability outside of bank office hours, and widespread acceptance of digital euros will have a significant impact on international trade and aim to unify all of Europe.
According to Bloomberg, the public, however, has mixed feelings about this because, like other central bank proposals to issue virtual currency, the digital euro is only a concept with little to no execution.
Commenting on the importance of implementing the digital euro, EU financial regulation chief Mairead McGuinness remarked:
Bringing the euro into the digital age is an important European project…By complementing cash, I have no doubt that a digital euro will bring advantages to citizens and businesses across the EU.
Meanwhile, for Christine Lagarde, the President of the European Central Bank, all existing cryptocurrencies are highly speculative and risky, and claims she would never invest in them.
According to Baker McKenzie Deutschland Partner Manuel Lorenz, in closed environments, such as games with in-game currencies, lies the biggest potential for cryptocurrencies and digital currencies. Lorenz also added that digital euros will continue to be used online in the same way as regular euros, missing out on possible opportunities.
As per the reports, after the pandemic, most of the venture capital funding and cryptocurrency hype have dried up, hence, ECB needs to refocus on fighting inflation rather than developing another digital currency.
Privacy concerns regarding government access to citizens’ personal information are another hurdle to overcome. As per the report, with the growth of digital transactions, the tech industry can access user data, making it more challenging to build a foundation.
The general public believes that the digital euro may appeal to the new tech-savvy population, but it could also exclude other sections of society, like senior citizens. Hence, they believe that a part of the fiat currency would remain in circulation, requiring even more time to implement the idea.
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