The European Central Bank (ECB) has expressed satisfaction with the legislative proposals for the digital euro put forth by the EC. In a recent speech to the European Parliament’s Committee on Economic and Monetary Affairs on September 4, ECB executive board member Fabio Panetta lauded these proposals as a groundbreaking step that places Europe at the forefront of central bank digital currency (CBDC) development. He believes this initiative could curb private sector dominance in the financial industry and mitigate associated risks.
Panetta, a known critic of cryptocurrencies, hailed the EC’s vision for the euro CBDC as “a new paradigm for preserving monetary sovereignty.” He emphasised that it would ensure Europeans always have access to a public payment option, whether in cash or digital form, even as private, closed-loop payment solutions gain traction, akin to popular messaging platforms that pressure users to conform.
🧵 A digital euro would be a new form of central bank money, says Executive Board member Fabio Panetta. It is now up to legislators to ensure it would replicate key characteristics of cash in the digital sphere, particularly its privacyhttps://t.co/nQJzYylwpV
— European Central Bank (@ecb) September 4, 2023
The EC proposes to grant the digital euro legal tender status, making its payment acceptance obligatory. Panetta also commended the EC’s privacy measures for the digital euro, highlighting that personal user details and payment information would remain confidential, with intermediaries only accessing necessary information for onboarding and regulatory compliance. Also, offline payment options would offer privacy akin to cash transactions, as neither intermediaries nor the central bank would process such payments.
The proposals encompass reasonable pricing policies and mechanisms for the ECB to maintain stability within the financial system, including holding limits. Panetta underlined that the European financial sector should consider issuing a digital euro an opportunity, not a risk.
Panetta warned against the alternative of maintaining the status quo, emphasising the risks associated with losing ground to new private payment solutions. He cited PayPal’s recent introduction of the PayPal USDT stablecoin as an example of such potential risks. Private payment service providers are driven by market share and have little incentive to limit their services or ensure compatibility with other systems. This could lead to market monopolies, as seen in the past.
In contrast, the digital euro’s introduction would address these concerns, facilitating orderly adjustments in the financial sector while providing payment service providers a platform for innovation across the Eurozone.