The Dutch central bank wants to be the proving ground for central bank digital currencies (CBDCs) in the European Union.
In a 45-page report released by the bank on April 21, the De Nederlandsche Bank (DNB) said it was “ready to play a leading role” with research and development into its own digital currency as well as a Europe-wide digital currency.
A digital Euro is expected to make cross-border payments faster and cheaper for all member states who participate. The Netherlands would be a suitable testing ground, the report said.
Though not the primary target of the report, the DNB singled out cryptocurrency Libra as a possible threat to monetary stability and conceded it was “the reason why the DNB and other central banks are now considering issuing their own digital currency.”
Use of physical currency declining
According to the report, the move is partly in response to the decreasing use of paper money and coins in the Netherlands. Nearly two thirds of all payments in the nation are digital.
In developing a digital currency, the DNB report questions “whether central banks should provide a new type of money that is better attuned to the needs of citizens and firms.”
Digital solutions for pandemic
With the pandemic measures shutting down many businesses worldwide, the DNB report notes that those that remain open are avoiding physical cash:
“Many stores now ask clients specifically not to pay in cash, which effectively means that only private money is accepted.”
As the money we use becomes more risky — both physically due to the risk of passing on COVID-19 and financially due to an uncertain economic future — the race for CBDCs is accelerating.
The People’s Bank of China issued a statement on April 4 saying that it will “undoubtedly continue” its CBDC development, calling a digital yuan one of its “top priorities.” Both South Korea and Sweden launched pilot programs to assess the feasibility of issuing a CBDC.
Netherlands leading the CBDC charge
EU members like France have recently begun experimenting with a digital euro, with even the European Central Bank president supporting the bank’s involvement developing a CBDC. However, as the DNB report notes, any decision on a digital Euro would require cooperation between member states.