Digital Euro's urgency acknowledged by ECB following Trump's executive order, what's the reason behind it?
The European Central Bank (ECB) is pushing forward with plans for a digital euro, a digital form of the euro similar to stablecoins, but issued and backed by a central bank. This move comes in response to concerns about bank disintermediation and the growth of dollar-backed stablecoins worldwide, as outlined in a recent executive order by President Trump.
Last week, Trump's executive order included a clause promoting and protecting the growth of lawful and legitimate dollar-backed stablecoins worldwide. This move has prompted the ECB to accelerate efforts in creating a digital euro. The ECB, backed by the European Union, is considering technical models including public blockchains like Ethereum or Solana.
However, the digital euro, if distributed via banks, could contribute to bank disintermediation. This is a concern that has been cited as one of the reasons for the need for a digital euro. The digital euro, as a central bank digital currency (CBDC), does not necessarily cure bank disintermediation, but it can accelerate it.
The banking federations are advocating for a more constrained rollout of the digital euro to prevent the flight of deposits to the CBDC. According to Reuters, ECB director Piero Cipollone, speaking at a conference in Frankfurt last week, said that a digital euro is needed due to concerns about bank disintermediation.
Cipollone also highlighted that the key word in the U.S. executive order is 'worldwide'. He did not specify what he said before advocating for the digital euro. The ECB has not specified how it plans to roll out the digital euro beyond advocating for it.
The potential impacts of a digital euro on the banking system and the economy are being closely watched and debated. The digital euro, if distributed via banks, would contribute to bank disintermediation. This means that the role of banks as intermediaries in transactions could be reduced, potentially leading to changes in the financial landscape.
Despite these concerns, the digital euro is not yet available to the public. The ECB is still in the process of studying the feasibility and implications of a digital euro, and a decision on its implementation has not been made.
In conclusion, the digital euro is a topic of significant interest and debate, as it could potentially shape the future of the European financial landscape. As the ECB continues to study and plan for the digital euro, the potential impacts on the banking system and the economy are being closely watched and debated.
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