Digital Euro Needed to Counter US Stablecoin Push, ECB Member Says
Banks in the Eurozone require a digital euro to respond to US President Donald Trump's initiative to promote stablecoins, a cryptocurrency linked to the US dollar, said European Central Bank (ECB) board member Piero Cipollone. Following Trump's executive order promoting the development of stablecoins, Cipollone expressed concerns that this move could further deplete bank customers, necessitating the ECB's issuance of a digital currency in response.
Stablecoins resemble money market funds, providing exposure to short-term interest rates in currencies like the US dollar. In contrast, a digital euro would take the form of an ECB-backed online wallet operated by banking institutions, enabling payments even for individuals without bank accounts while potentially capping holdings and offering no interest.
Despite reservations from banks regarding potential losses due to customers moving funds to ECB-guaranteed wallets, the ECB is exploring the implementation of a digital euro. However, a final decision awaits the approval of legislation by European lawmakers.
Trump's executive order also barred the Federal Reserve from issuing a central bank digital currency (CBDC). Notably, Nigeria, Jamaica, and the Bahamas have already implemented digital currencies, while 44 other countries, including Russia, China, Australia, and Brazil, are conducting pilot programs, according to the Atlantic Council think tank.