European Central Bank Expresses Concerns Over U.S. Stablecoins and Advances Digital Euro Push
FRANKFURT, Feb 6 (Reuters) — The European Central Bank (ECB) is increasingly concerned about the implications of U.S. stablecoins for European banks, as highlighted by board member Piero Cipollone in a recent interview. Amid U.S. President Donald Trump’s plans to bolster cryptocurrencies linked to the U.S. dollar, Cipollone views this development as a potential catalyst for expedited legislative support for the digital euro.
Cipollone emphasized that the ECB’s proposed digital euro aims to serve as an electronic payment method that is independent of dominant American payment systems, such as Visa and PayPal. By creating and promoting an EU-backed digital currency, the ECB intends to provide an alternative that could help retain European deposits and mitigate the influence of U.S. financial technologies.
‘The launch of stablecoins that are globally accessible and tied to the dollar is concerning,’ Cipollone stated. ‘If Europeans start using these stablecoins for transactions, they may shift their deposits from European banks to U.S. financial institutions.’ This shift poses a serious risk to the stability of local banking systems.
The European Commission initially proposed legislation for the digital euro in June 2023, but legislative progress has seen delays due to skepticism from various stakeholders, including lawmakers and bankers. Cipollone remains hopeful that increased political awareness regarding stablecoins will accelerate the process.
‘I believe a sense of urgency is building within the political landscape,’ he said. ‘There’s a possibility we could see significant movement on the digital euro legislation in the coming months.’
Cipollone expressed optimism that the European Parliament and Council could finalize their discussions on digital euro legislation by the summer, which would facilitate negotiations with the Commission. He noted that this timeline would be crucial, as ECB policymakers are scheduled to vote in November on whether to launch the digital currency.
However, the process of political decision-making is rarely straightforward. ‘Political processes are complex, with many matters at play,” he acknowledged. “While we prefer speed, we understand the necessity for thorough considerations.’
Concerns over the digital euro’s impact on traditional banking are palpable. Bankers fear that a widely adopted digital euro could lead to significant withdrawals from their institutions as customers seek the safety of a central bank-backed digital wallet. In response to these worries, the ECB has indicated that holdings in the digital euro may be limited to a few thousand euros and would not accrue interest.
In the broader context of central bank digital currencies (CBDCs), other nations, including Nigeria, Jamaica, and the Bahamas, have already rolled out their own versions, while 44 additional countries such as Russia, China, Australia, and Brazil are testing various pilot programs. In contrast, the Trump administration previously prohibited the U.S. Federal Reserve from launching a CBDC.
As the landscape of digital finance continues to evolve, the ECB remains focused on ensuring that Europe maintains a competitive edge in digital payments while safeguarding the stability of its banking system.
Reporting by Francesco Canepa; Editing by Kirsten Donovan
(Thomson Reuters Trust Principles.)
Share this article:
