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As countries race to develop central bank digital currencies, the European Central Bank (ECB) is looking into how the digital euro can be adopted as legal tender within the EU borders.
The ECB executive, Fabio Panetta, has stated that the central bank will look into how an EU CBDC can be adopted as legal tender in the next months.
Digital euro has the potential of being legal tender
Panetta is a member of the Executive Board of the European Central Bank. During a panel discussion in Helsinki, he stated that if the ECB launched a digital currency, it would have the features needed to function as legal tender within the EU.
However, he noted that such functionality would only be achieved through much research during the next two years, where various factors will be evaluated. He also urged the ECB to be cautious before making this possible because the launch of a digital Euro should not be taken for granted.
Panetta further noted that a digital euro would eliminate the issue of redundancy by focusing on cost-effectiveness and usability. These features would trigger widespread adoption of this CBDC. He also noted that this CBDC would also be developed to be “attractive enough” to the general population.
Digital euro is currently in the investigation phase
Like most developed economies, the European region is also looking into CBDCs. The region is currently planning to launch an investigation phase for the development of the digital euro. This phase will last for 24 months.
The investigation phase will address major issues such as the design and distribution of this digital currency. Moreover, this CBDC needs to meet the needs of Europeans. Unlike other cryptocurrencies, it also needs to prevent its use in illegal activities, and it should not affect financial and monetary stability.
The President of the ECB, Christine Lagarde, has previously stated that this digital currency needs to be a safe form of money. In addition, the ECB stated that a digital euro would consume less energy compared to Bitcoin. This will also solve another major issue faced by cryptocurrencies.
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