Piero Cipollone, a member of the European Central Bank board, stated on Friday that eurozone banks require a digital euro to react to U.S. President Donald Trump’s efforts to promote stablecoins, a kind of cryptocurrency that is usually based on the U.S. dollar.
In an executive order released on Thursday, Trump claimed he would “promote the development and growth of lawful and legitimate dollar-backed stablecoins worldwide” as part of a larger crypto plan.
According to Cipollone, this would help entice even more clients away from banks and bolster the argument for the ECB to respond by introducing its own digital money.
Cipollone said at a seminar in Frankfurt, “I suppose the key word here (in Trump’s executive order) is worldwide.”
“As you are all aware, this approach further disintermediates banks because they lose fees and customers. We therefore require a digital euro.
Like money market funds, stablecoins provide exposure to short-term interest rates in a designated currency, usually the US dollar.
In contrast, a digital euro would be an online wallet run by banks and other businesses but backed by the ECB.
Laptops 1000It would enable payments to be made by anybody, even those without a bank account. Holdings would probably be unpaid and capped at a few thousand euros.
As consumers move some of their currency to the security of an ECB-guaranteed wallet, banks have voiced concerns that a digital euro would drain their coffers.
The eurozone’s central bank is testing the practicalities of a digital euro. However, it will not decide whether to launch it until European lawmakers have approved relevant legislation.
Additionally, Trump’s executive order prohibited the Federal Reserve from launching its central bank digital currency (CBDC).
