Digital currency. Illustration photo. (Source: Vietnam+)
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ECB Board Member Piero Cipollone recently argued that banks in the Eurozone need a digital euro to counter US President Donald Trump’s push for stablecoins, a type of digital currency often pegged to the US dollar.
Trump had previously declared that he would “promote the development and use of legitimate private-sector digital assets and currencies that are pegged to the US dollar.”
This was part of a broader digital currency strategy outlined in an executive order issued earlier this week.
Trump’s executive order also prohibits the US Federal Reserve (Fed) from issuing a central bank digital currency (CBDC).
Cipollone believes that the US push for stablecoins will draw more customers away from traditional banks, further reinforcing the reason for the ECB to issue its own digital euro as a countermeasure.
Speaking at a conference in Frankfurt, Cipollone explained that a global push for stablecoins by the US would further weaken the intermediary role of banks, causing them to lose transaction fees and customers.
Hence, according to Cipollone, the ECB needs to introduce a digital euro to counter this development.
Stablecoins function similarly to money market funds in that they allow users access to short-term interest rates of an official currency, mostly the US dollar.
Similar to earning interest by depositing money into a money market fund, holding stablecoins can also generate profits based on the interest rate of the currency it is pegged to, typically the US dollar.
In contrast, the digital euro would essentially be an online electronic wallet guaranteed by the ECB but operated by companies such as banks. This tool would enable everyone, including those without bank accounts, to make payments.
The amount of digital euro held may be limited to a few thousand euros and would not earn interest. Banks have expressed concerns that the digital euro could drain their cash reserves as customers shift a portion of their cash holdings to the ECB-backed electronic wallet.
The ECB is currently testing the operational feasibility of a digital euro. However, the final decision on whether to issue the currency will be made after European lawmakers pass relevant legislation.
According to the Atlantic Council, Nigeria, Jamaica, and the Bahamas have issued digital currencies, and 44 other countries, including Russia, China, Australia, and Brazil, are conducting pilot programs./.
Khanh Ly
– 20:45 25/01/2025
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