As central bankers all over the world consider issuing their own digital currency, coined CBDCs, a former member of the fold has argued that they should leave it up to the industry.
Jón Helgi Egilsson, a former chairman of the Icelandic central bank’s supervisory board, said at a conference on Wednesday that central bank digital currencies (CBDCs) need not be issued by the institutions themselves.
“Where private companies compete in the market, in technical and business innovation, a CBDC or CBDC equivalent does not have to be offered by a central bank,” he said in a speech at Brussels Blockchain Week.
“It may serve the currency better if the central bank removes itself from competition.”
He pointed to the U.S. draft bill that proposes allowing non-bank issuers of stablecoins access to central bank money as an example of a positive approach to private players, and said that the measures, if approved, “could create a competitive advantage for the US dollar over the euro, as tokens”.
Egilsson, who is now the co-founder of digital euro token issuer Monerium, added that if central banks do not step back from the market, this could create a conflict of interest when it comes to regulating their digital money competitors.
By removing themselves from competition in the retail CBDC space, central banks would also “encourage more investments” and allow technical innovation to “flourish,” Egilsson said.
“So, I say to central banks that they should embrace competition,” he said. “And ensure that their currencies are offered in a regulated shape, and fair manner.”
Crunch time for CBDCs
Egilsson was speaking at a time when many countries—such as Australia, China and soon Hong Kong—have already begun trialing a digital version of their currencies, while other major markets including the U.S., the Eurozone, and the UK are all consulting on their own possible CBDCs.
But the idea is not uncontroversial, with observers warning of privacy concerns, while public understanding and support in some places is low. In Nigeria, the eNaira has seen limited adoption despite efforts from the authorities.
In Europe, the European Central Bank (ECB) will decide later this year whether to go ahead with creating a digital euro. At the same time, the EU’s new Markets in Crypto Assets (MiCA) regulation is set to put new obligations on the shoulders of stablecoin issuers.
Meanwhile the prospect of a digital dollar is becoming a hot-button issue in the U.S. 2024 presidential race, with Republican candidate Ron DeSantis and Democratic candidate Robert F. Kennedy both opposed to CBDCs.
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