The Central Bank of Europe has issued a warning statement to its member states that failure in issuing a cryptocurrency may result in a decrease in the value of the Euro and trigger loss of control over the financial policies of the European Union. The report, The International Role of the Euro, issued by the European Central Bank, urges every member to pay heed to the financial stability risks associated with the failure of the Bank to offer digital assets.
It is to be noted that the international recognition of the Euro is quite powerful due to the country’s fundamental economic forces. However, this recognition of the currency could be under threat due to the issue of private cryptocurrency assets offered by foreign technology giants like the Libra/Diem project of Facebook and more. Such a threat is likely to dominate both the national and international Euro reputation, and therefore measures need to be adopted soon for protecting the Euro.
The report also added that the non-issue of digital currencies might have an adverse impact on the Central Bank’s ability to comply with its fiscal policy while playing a lender of loans to its members. It has been concluded by the report that the issue of the Central Bank Digital Currency will help in maintaining the autonomy of the national payment systems and global use of the currency in the digital world.
A problem that may affect the international influence and acceptability of the digital Euro currency is anonymity. Anonymity is essential for the preservation of transactional privacy and public security. One way of resolving the issue would be to limit the number of digital Euros that non-citizens may use. However, this resolution may qualify the benefits of CBDC as a currency for cross-border payments. China’s suggestion of equipping CBDC with traceability is now being considered for the security of using CBDC for international transactions.