Economy

Pandemic hastening shift to digital currency: ECB chief

Christine Lagarde says COVID-19 accelerates trend towards digitalization, with surge in online, contactless payments

The coronavirus pandemic has accelerated the trend towards digitalization, with non-cash payments on the rise, making a change in the nature of money faster, the president of the European Central Bank (ECB) said Monday.

“As the world enters the digital age, the nature of money, but also of goods and services, has been changing quickly,” Christine Lagarde said in an article for the French magazine L’ENA hors les murs.

Lagarde pointed out that digitalization and technological advances are altering all areas of society, hastening the process of dematerialization.

Noting that non-cash payments continue to increase, she said “in the euro area, over the last year, the total number increased by 8.1% to 98 billion.

Nearly half of these transactions were made by card, followed by credit transfers and direct debits.

Citing a survey conducted in 2019, she said market participants expect payments to be the financial service that will be the most affected by technological innovation and competition over the next five years.

Lagarde also urged caution over the use of crypto-assets such as bitcoin, saying this will bring both new opportunities and new risks.

“Transactions between peers occur directly, with no need for a trusted third-party intermediary,” she stressed, adding the main risk lies in relying purely on technology and the flawed concept of there being no identifiable issuer or claim.

“This also means that users cannot rely on crypto-assets maintaining a stable value: they are highly volatile, illiquid and speculative, and so do not fulfil all the functions of money.”

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