RIGA - It is important for central banks to get involved in handling cryptoassets and other new virtual payment systems, Bank of Latvia Governor Martins Kazaks said in an interview with LETA, adding that the emergence of a digital euro is just a matter of time.
"Technological development is very fast and people and entrepreneurs are eager to use these technologies. In my opinion, it is just impossible for central banks not to take part in this. There are several reasons for this. Firstly, if they find it convenient, people will use these services. But this can entail a number of risks from the perspective of the central bank or the state," Kazaks said.
The Bank of Latvia head noted that the duty of every central bank is not only to ensure payments and circulation of cash but to also regulate the economy. For instance, when the economy is growing too slowly, interest rates have to be reduced to stimulate growth. When the economic growth rate is too fast, giving rise to "bubbles", rates have to be raised to put brakes on these processes.
"If central banks give up control over the circulation of money to Facebook or some other issuer of cryptoactives, they are left unable to help the economy in the times of crisis. Is it good? I think not, because this will also bring about social problems. If these functions are delegated to someone else, we do not know what their interests are. Will they help the economy or not? Will they lend their support or not?" Kazaks said.
The Bank of Latvia governor also indicated that if the payment systems are handed over to some third-party, it is no longer possible to ensure the prevention of money laundering and other financial crimes.
Kazaks said that although the European Central Bank has not yet taken any decisions about the matter, he personally believes that the emergence of a digital euro is only a matter of time.
At the same time, one should not expect cash to disappear in a foreseeable future despite growing the popularity of non-cash transactions.