The Advancements of Digital Euro and Stablecoins: Insights from an ECB Executive Board Member
In his address to the Committee on Economic and Monetary Affairs of the European Parliament, Fabio Panetta, a member of the executive board of the European Central Bank (ECB), shed light on stablecoins and the digital euro. The ECB officially initiated the investigation phase for the digital euro in October 2021 and has since made substantial progress. According to Panetta, the investigation phase is now reaching its final stage, paving the way for the Governing Council to determine the project’s next phase.
While highlighting the importance of keeping pace with the technological revolution in payments, Panetta stressed the potential impact of dominant private actors in the digital payments market. He cited Paypal’s recent decision to launch its own stablecoin as a tangible example. He cautioned that private payment service providers, including Paypal, have no incentive to limit the adoption of their stablecoins or the range of services they offer. On the contrary, their objective is to expand their customer base and gain market share.
Panetta expressed concerns about the compatibility of private payment solutions with existing systems and competition in the market. He argued that a digital euro, introduced by public authorities under a European regulatory framework, would address these issues. Unlike stablecoins issued by big tech companies, the digital euro would be distributed through banks and other payment service providers, ensuring the maintenance of customer relationships.
Next month, the ECB will present its findings from the investigation phase, and the Governing Council will decide on the project’s progression. If the next phase is approved, the ECB and national central banks of euro area countries will continue analyzing digital euro functionalities and work towards developing and testing technical solutions and business arrangements for the potential issuance of a digital euro.
Hot Take
The introduction of the digital euro presents a crucial opportunity for the European financial sector to adapt to the evolving payment landscape. While private stablecoins may initially promote innovation, they also raise concerns about monopolistic practices and limited compatibility. By taking a public-centric approach, the digital euro can offer a regulated platform for innovation while ensuring the preservation of customer relationships. The ECB’s careful evaluation and development of the digital euro project will shape the future of payments in the European Union.
By
By
By
By