ECB Eyes U.S. Stablecoins with Concern, Advocates for Swift Implementation of Digital Euro
FRANKFURT, February 6 (Reuters) – The European Central Bank (ECB) is hoping that the recent support for cryptocurrencies expressed by former U.S. President Donald Trump will hasten legislative backing for its proposed digital euro, according to ECB board member Piero Cipollone.
The ECB views its digital currency, essentially an online wallet backed by the central bank, as an alternative electronic payment method, independent of U.S.-based payment providers such as Visa and PayPal. Cipollone stated that Trump’s endorsement of globally accessible, dollar-pegged stablecoins would lead to another U.S.-driven payment tool and further emphasize the urgency of the digital euro initiative.
The European Commission put forth digital euro legislation in June 2023. However, progress has been slow due to skepticism from some lawmakers and bankers. “The political world is becoming more alert to this,” Cipollone said in an interview on Wednesday. “And it’s possible that we will see an acceleration in the process.” Cipollone expressed his hope that the EU’s Parliament and Council would finalize work on the digital euro legislation before summer, facilitating negotiations with the Commission.
This timeline would allow for the new rules to be completed by November, when ECB policymakers are slated to vote on whether to launch the digital currency. “Political processes are complex and there are many things on the table,” Cipollone noted. “Obviously the sooner the better, but we fully understand their needs.”
Asked about the proposed timeline, EU lawmaker Markus Ferber noted that Parliament may have a report ready by the summer at best. Like money market funds, stablecoins provide exposure to short-term interest rates in official currencies, while also facilitating payments. Cipollone stated that the increasing use of U.S. stablecoins as a payment method was “worrisome” because of its potential to divert deposits from European banks. “If people in Europe start to use stablecoins to pay, given that most of them are American and dollar-based, they will be transferring their deposits from Europe to the United States,” he explained.
Bankers are worried that a digital euro could similarly drain their funds as customers transfer money to an ECB-guaranteed wallet. To alleviate these concerns, the ECB indicated that holdings in the digital euro would likely be capped at a few thousand euros and would not earn interest. Nigeria, Jamaica, and the Bahamas have already launched central bank digital currencies (CBDC), with an additional 44 countries, including Russia, China, Australia, and Brazil, running pilot programs, according to the Atlantic Council think tank. In contrast to the global trend, Trump prohibited the U.S. Federal Reserve from issuing its own CBDC.
