European Central Bank (ECB) executive board member Fabio Panetta has claimed that despite the growth in digital currency, there is still a huge demand for physical cash.
The growing digitalisation of Europe’s economy has been strongly driven by the Covid-19 pandemic, as more people have turned to digital currencies and card-based payments to conduct their business.
Last year, a Eurosystem survey found that around 40% of respondents were using cash on a less frequent basis than they were before. Even prior to the pandemic, the volume of cash being lodged at central and commercial banks had dropped by 25% in the Euro area, according to Finextra.
However, Panetta has stated that despite the substantial drop in the use of cash for payments, there has also been a huge rise in demand for euro banknotes over the last year – with a €190 billion increase between March 2020 and May 2021.
Panetta believes this could be due to people turning to cash as a tool to manage uncertainty, claiming that the store of value function guarantees a persistent level of demand for banknotes even as digital payments ascend.
He also remarked that the Eurosystem will safeguard physical money even if the community eventually launches a digital euro.
Panetta said, “Given its many functions, I expect cash to survive the digital revolution and that people will continue to use it for many years to come.”
He also stated that as for the digital euro, the currency would become a complement to cash, instead of replacing it altogether.
A recent consultation conducted by the ECB found privacy would be valued most in consideration of a potential future digital euro.
Copyright © 2021 RegTech Analyst
Copyright © 2018 RegTech Analyst
