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 Monetaryย Authority (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 projectโs next phase.
Althoughย while highlighting the importance of keeping pace with the technological revolution in payments, Panetta stressed theย capacity impact of dominant private actors in the digital payments market. He cited Paypalโs recent decision to launch its own stablecoin as a tangible example. He cautioned that private payment service providers, including Paypal, have no incentive toย delimit 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 claimedย that a digital euro, introduced by public authorities under a European regulatory framework, would address theseย matters. Inย contrastย toย stablecoins announced by big tech corporations, the digital euro would be distributed through banks and other payment service providers, ensuring the maintenance of customer relationships.
Next 30ย days, the ECB will present its findings from the investigation phase, and the Governing Council will decide on the projectโs 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 theย capacity issuance of a digital euro.
Hot Take
The introduction of the digital euro presents a critical opportunity for the European financial sector to adapt to the evolving payment landscape. Althoughย while private stablecoins may atย theย beginning encourage innovation, they likewise 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 ECBโs careful evaluation and development of the digital euro project will shape futureย ofย the payments in the European Union.
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