Philip Lane, the Chief Economist of the European Central Bank (ECB), has stressed the necessity of a digital euro, highlighting its potential to alleviate risks posed by stablecoins and lessen dependence on US payment companies, as reported on March 20.
Speaking at a conference in Cork, Ireland, Lane articulated that a central bank digital currency (CBDC) like the digital euro is crucial for preserving Europe’s monetary and financial independence amid rising geopolitical fragmentation.
He mentioned:
“[Digital euro would] reduce the chances of foreign-currency stablecoins establishing themselves as a medium of exchange in the eurozone.”
Tackling the rise of stablecoins
Lane underscored the swift increase in European interest regarding stablecoins, which are largely linked to the US dollar. He further indicated Europe’s current reliance on American payment giants like Visa, Mastercard, PayPal, Apple, and Google, describing this as a weakness within the region’s financial infrastructure.
In this regard, Lane contended that the introduction of a digital euro could help address Europe’s fragmentation in retail payments and act as a cohesive element to foster collaboration among banks and payment service providers.
He added:
“The argument for a central bank digital currency is particularly compelling for a monetary union, especially given the current fragmented and externally reliant payments system.”
Advocating for a digital euro
The ECB has been working on the digital euro initiative since 2021 and expects to finalize its preparatory phase by October.
Earlier on March 20, ECB President Christine Lagarde informed legislators in Brussels that Europe needs to expedite advancements on retail and wholesale versions of the digital euro to enhance financial sovereignty and decrease external vulnerabilities.
Significantly, Lane’s comments are the third such call for the digital euro made by ECB officials this year. On March 17, François Villeroy de Galhau, a member of the ECB Governing Council, cautioned that former President Donald Trump’s strong push for crypto adoption could cause financial instability.
Villeroy de Galhau urged European regulators to bolster measures to mitigate potential risks, expressing concerns that the US might generate systemic risks beyond its borders by promoting cryptocurrency and non-bank finance without adequate oversight.
Additionally, ECB board member Piero Cipollone called for an expedited rollout of the digital euro in light of Trump’s executive order promoting dollar-backed stablecoins on January 24.
During a conference in Frankfurt, Cipollone stated that stablecoins represent an increasing threat to traditional banking systems and financial intermediaries, potentially undermining bank revenues and client relationships.
He emphasized that a digital euro is essential to counteract these trends and retain control over the monetary system.
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