Frankfurt: The European Central Bank (ECB) sees potential in U.S. President Donald Trump’s support for cryptocurrencies tied to the U.S. dollar, believing it could expedite the legislative process for the digital euro, according to ECB board member Piero Cipollone in a recent Reuters interview.
The ECB has long championed the digital euro, positioning it as an online wallet guaranteed by the central bank, offering an alternative to the U.S.-dominated digital payment systems like Visa and PayPal. Cipollone remarked that Trump’s endorsement of globally accessible stablecoins pegged to the dollar could prompt further global reliance on U.S.-made payment tools, thereby emphasizing the urgency of developing the digital euro.
In June 2023, the European Commission proposed digital euro legislation, but progress has been slow, with skepticism from certain lawmakers and banking institutions. Cipollone expressed hope that the political climate was shifting, suggesting that the growing global interest in digital payments might accelerate the legislative process.
“The political world is becoming more alert to this,” Cipollone shared. “And it’s possible that we will see an acceleration in the process.”
He expressed optimism that both the EU Parliament and Council would finalize work on the digital euro legislation by summer 2024. This would set the stage for negotiations with the European Commission, allowing final approval by November, when ECB policymakers will vote on whether to officially launch the digital currency.
“Political processes are complex and there are many things on the table,” Cipollone said. “Obviously, the sooner the better, but we fully understand their needs.”
However, EU lawmaker Markus Ferber cautioned that the EU Parliament might only have a report ready by summer 2024, rather than a finalized plan.
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Stablecoins, similar to money market funds, offer exposure to short-term interest rates tied to official currencies and can be used for transactions. Cipollone expressed concern over the growing use of U.S.-based stablecoins, citing the risk of European depositors shifting their funds to the U.S.
“If people in Europe start to use stablecoins to pay, given that most of them are American and dollar-based, they will be transferring their deposits from Europe to the United States,” Cipollone noted.
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Bankers have raised concerns that the digital euro might lead to a mass withdrawal of funds from European banks as consumers opt for ECB-guaranteed wallets. To address these concerns, the ECB has suggested that digital euro holdings would likely be capped at a few thousand euros and would not accrue interest.
While countries like Nigeria, Jamaica, and the Bahamas have already launched their central bank digital currencies (CBDCs), with 44 additional countries, including Russia, China, and Brazil, running pilots, Cipollone emphasized the unique challenges Europe faces in keeping pace. Trump, for his part, has blocked the U.S. Federal Reserve from issuing its own CBDC, further adding to the global divide in digital currency development.
