Europe's Central Bank rejects Estonia's virtual currency idea

Web_Photo_ECB_041214

A sculpture featuring the EURO logo is pictured in front of the European Central Bank (ECB) in Frankfurt am Main, western Germany, December 2, 2014.

A sculpture featuring the EURO logo is pictured in front of the European Central Bank (ECB) in Frankfurt am Main, western Germany, December 2, 2014.

Web_Photo_ECB_041214

A sculpture featuring the EURO logo is pictured in front of the European Central Bank (ECB) in Frankfurt am Main, western Germany, December 2, 2014.

A sculpture featuring the EURO logo is pictured in front of the European Central Bank (ECB) in Frankfurt am Main, western Germany, December 2, 2014.

FRANKFURT, Germany  – The European Central Bank's president criticised Thursday a proposal by the Estonian government to launch a state-managed digital currency, reaffirming instead that the euro was the only valid money in the euro area.

A rise in popularity in so-called cryptocurrencies, which are normally issued by private companies and exist only in electronic form, has been worrying the ECB, which has said they could, in theory, erode its control over the supply of money.

Estonia became the first European country to openly discuss the prospect of a digital currency managed by the government and offered to the country's more than 20,000 e-residents: foreign entrepreneurs who open a firm in the country via the web.

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ECB president Mario Draghi's comments come as the status of the euro is called into question in Italy, where an opposition party proposed the government issued small-denomination, interest-free bonds to pay suppliers as a way to circumvent a ban on currencies other than the euro.

"I won't comment on the Italian intention but I will comment on the Estonian decision: no member state can introduce its own currency." Draghi said in answer to a question during his regular press conference. "The currency of the euro zone is the euro."

The idea for the 'estcoin' came from Kaspar Korjus, the head of Estonia's e-Residency project. The Tallinn government is now seeking feedback online.