Suspicions, suspicions, rumors, bulos … surround the launch of the digital euro. The birth of this fate of digital cash will not be a simple task. The European Central Bank (ECB) seems to be more convinced than ever of the need for its launch, but the more convinced and the more the project progresses, the greater rejection generates in certain sectors of the population that see this new form of money as a direct threat to cash (tickets and coins) and its freedom against the ‘state claws’. However, the ECB does not tire of ensuring that the cash will not disappear and that the digital euro, precisely what it seeks to counteract the fall in the use of money (the decrease in the demand for bills and coins). The truth is that nobody knows when the digital euro will begin to circulate (there is no official date, but it was rumored that it could be between 2026 and 2027), although the latest movements and statements of the ECB seem to go in the same address: There could be a certain hurry in the ECB to advance the launch In an attempt to prevent Stablcoins and the growing use of ‘private’ money from reducing the power of monetary policy. This has been revealed by Phillip Lane, chief economist of the ECB, In a long speech Pronounced this week.
In a speech delivered this March 20, The ECB chief economist, Philip R. LaneIt was resounding: “It is imperative for the ECB to enter a digital euro” because the stability of the monetary system is at stake. Concern is not less: the use of cash is falling sustained (Here are a recent example in Belgium), and with him, The capacity of central banks to anchor confidence in the currency. To this is added the rise of the stablecoins, cryptocurrencies and the risk of losing sovereignty against foreign digital currencies (CBDC) or payment systems dominated by large technological platforms.
One of Lane’s main warnings is that, in a context where digital payments and electronic portfolios grow in double digit, “the slightest possibility of paying with tickets in a digitalized world raises deep questions about the role of the money of the central bank and the stability of the monetary system.” The cash in cash has historically acted as “the glue” that maintains the equivalence between commercial banks money (deposits) and the money of the Central Bank (banknotes and bank reservations), ensuring public confidence in the convertibility and solidity of the system. If the cash disappears, that anchor weakens. “Without a positive demand for money from the Central Bank, the link between monetary policy and economic conditions could disappear,” LANE warns. However, the head economist of the Central Bank makes it clear that even with a zero cash demand, the ECB still would have some capacity to control monetary policy through the types that it establishes on bank reserves (the money that commercial banks maintain in the Central Bank).
In spite of everything, the concern in the ECB for the decrease in the use of cash and boom of other types of money and assets is evident. From ING they coincide with this point of view and stand out in an February report that “The decrease in the use of cash in the economy is generating concern among national regulators. At present, digital payments (Whether online or face -to -face) can only be made through the use of ‘private money’, that is, that created by commercial banks and other payment service providers. Since the money from the Central Bank (in its current form of tickets and coins) it cannot be used in digital payments, its use is automatically reduced. “
This combination of a global fall in the use of cash (which is still the favorite payment method in many economies) and a vertiginous increase in digital payment systems raises doubts about the role of the money of the Central Bank as monetary anchor. In the Eurozone, Citizens’ trust in private money is based on their convertibility one by one with the money from the Central Bankwhose nominal value is the only intrinsically guaranteed. If this convertibility was lost, a situation of tension in the financial system could lead to a loss of confidence both in private digital currencies and, ultimately, in the central banks themselves.
“Given this panorama, abandoning the current two -layer monetary system – with the money of the Central Bank in the first and private money in the second – could weaken the mechanisms of transmission of monetary policy and reduce the capacity of central banks to guarantee financial stability. Therefore, regulators from all Digital, “Ing experts say.
The digital euro is not a new currency, or a cryptoactive, not even bank money. Although for the consumer on foot there is no difference when paying with euros in metallic or by card, the difference is important when analyzing these movements of millions of consumers in monetary aggregates and in the banks of the banks. Cash is part of the monetary base (the purest money), while payment with cards or electronic money is part of the money supply, money created by commercial banks. The digital euro will be like cash, pure, public, created and, possibly, saved in the Central Bank, which would reinforce the power of monetary policy and its transmission. If the ECB would like to cool the economy, it would only have to raise the interest it pays intensely (Thinking about the future) about those digital euros for families and companies to place their savings in the Central Bank, reducing their consumption and investment. Not only that, the ECB has other concerns.
The ECB observes with restlessness the progress of the stablecoins (cryptocurrencies backed by liquid assets such as bonds or bank deposits, usually in dollars) that could gain traction as a general means of payment, displacing commercial banks and altering the operation of the credit in Europe. The risk is double: on the one hand, these currencies do not always maintain the promised parity and, without adequate supervision, they could cause episodes of financial panic. On the other, if the stablcoins referenced to the dollar won quota as a means of payment in Europe, the monetary policy of the ECB could become irrelevant. “A growing prevalence of stablecoins called in foreign currency would erode monetary sovereignty “warns Lane. In its vision, the digital euro should serve as “prudent and vision of the future” to preserve the fundamental principles of the system: “stability, trust and inclusion.”
The elongated shadow of the US
In this sense, he also manifested at the end of January Piero CipolloneMember of the Board of Directors of the European Central Bank. Cipollone explained that Eurozone banks need a digital euro to respond to the initiative of US President Donald Trump to promote stablcoins. In January, Donald Trump said that “it would promote the development and growth of legal and legitimate stable currencies backed by dollars worldwide” as part of a broader cryptographic strategy that outlined in an executive order that was collected by the Reuters agency.
Cipollone added that This would help attract even more clients of the banks and reinforce the arguments so that the ECB sets its own digital currency In response. “I suppose the keyword here (in Trump’s executive order) is ‘World’,” Cipollone said at a conference in Frankfurt. “This solution, as everyone knows, even more disintermedia banks, since they lose commissions and customers … That’s why we need a digital euro.”
The stablecoin work similar to the money market funds, since they offer exposure to short -term interest rates in an official currency, almost always the US dollar. A digital euro, on the other hand, would be essentially an electronic wallet guaranteed by the ECB, but operated by companies such as banks. It would allow people, even those who do not have a bank account, make payments. The holdings would probably be limited to a few thousand euros and would not be paid.
So that The solution proposed by the ECB is to introduce this digital cash versionaccessible to the general public and issued directly by the Central Bank. With this, it would be guaranteed that all citizens can continue making payments with money “insensitive to information” – that is, it does not depend on the solvency of any private bank – even in an environment without tickets. Lane defends that the digital euro will not only serve to preserve the effectiveness of monetary policy, but also to curb the fragmentation of the payment system in Europe, today dominated by non -European platforms. “The digital euro would act as an open and interoperable alternative against closed ecosystems,” he said.
Finally, The ECB links the digital euro with the strategic autonomy of Europe. In Lane’s words, “the dependence on foreign payments suppliers exposes Europe to economic and coercive pressures” in a geopolitically fragmented world. Currently, 65% of card payments in the Eurozone are processed through networks such as Visa or Mastercard. To this are added Apple Pay, Google Pay or PayPalthat they already concentrate a tenth of retail payments and grow quickly. In this context, the ECB fears that Europe ends “outsourcing its payment infrastructure” if it does not act quickly. Hence the digital euro is not only a technical advance, but an answer to “risks that would increase with each delay.”
In short, Lane’s speech marks a turning point: the digital euro is no longer a distant option, but a strategic need. Faced with the disappearance of cash, the progress of private currencies and the domain of foreign platforms, the ECB wants to maintain the reins of the European monetary system. As Lane concludes, “issuing a digital euro is not just about adapting to technological change, but about safeguarding the foundations of our monetary system in an era of accelerated transformation.”
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