Dutch central bank wants to lead the development of a digital Euro

on Apr 22, 2020
  • Creating a digital Euro would reportedly help simplify cross-border transactions.
  • DNB notes that the use of fiat currencies in the Netherlands has plunged significantly.
  • The race for issuing CBDCs has intensified with South Korea and Sweden being the most-recent entries.

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The Dutch central bank wants to spearhead the creation of Central Bank Digital Currencies (CBDCs) in the European Union (EU). The bank unveiled this news through a 45-page report that it published on April 21.

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In the report, De Nederlandsche Bank (DNB) noted that it was ready to play a leading role in the research and development of its digital currency. On top of this, the bank seeks to lead the creation of a Europe-wide digital currency.

Reportedly, a Digital Euro would help make cross-border transactions cheaper and faster for all member states that will participate in its creation. According to DBN, the Netherlands would be a suitable testing ground for the digital currency. While the report’s main topic was not Libra, the bank said that the coin is a possible threat to monetary stability. DNB added that this was the reason as to why EU central banks are now considering issuing their own digital currency.

Use of fiats is declining

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Per the publication, DBN deems it a necessary move to create CBDC due to the diminishing use of paper money and coins in the Netherlands. At the moment, almost two-thirds of all payments in the country are digital. However, DNB noted that some issues need addressing before proceeding to create a digital currency. For instance, the bank is not sure whether central banks should provide a new type of money that best fits the needs of citizens and corporations.

The Dutch central bank added that the current COVID-19 pandemic has further contributed to the decreasing use of physical cash. Due to the pandemic, most businesses have shut down. Meanwhile, the few that have remained operational are avoiding the use of fiats to help prevent further spread of the Coronavirus.

The bank said,

“Many stores now ask clients specifically not to pay in cash, which effectively means that only private money is accepted.”

A fast-paced race towards creating CBDCs

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This news comes after the People’s Bank of China (PBoC) issued a statement on April 4, noting that it would unswervingly continue the development of its CBDC. In the statement, the bank noted that the development of a digital yuan is one of its top priorities. Apart from China, South Korea and Sweden are also in the race to create CBDCs. Both countries recently launched pilot programs to weigh the feasibility of issuing central bank digital currencies.

Some European countries such as France have also started experimenting with a digital Euro. However, DNB believes that any decision on a digital Euro would require all member states to cooperate.

Do you think DNB is the best candidate to spearhead the development of a digital Euro? Share your thoughts in the comment section below.