The Columbus Dispatch
European Central Bank preps for future
to merchants through banks and payment services providers, Lagarde said in a recent panel discussion.
She drew an analogy to Europe’s previous reliance on Russian oil and natural gas, which led to an energy crisis when the invasion of Ukraine disrupted that supply.
“It’s very unhealthy to rely on one single source of energy, it’s very unhealthy to rely on one single source of payment,” she said.
A digital euro also could help people who don’t have bank accounts, the thinking goes, because they could hold money on their phones.
The move toward increased digitalization comes as the ECB marks 25 years since its creation on June 1, 1998, seven months ahead of the introduction of the euro currency. An anniversary ceremony with German Chancellor Olaf Scholz and former ECB Presidents Mario Draghi and Jean-claude Trichet is planned Wednesday at the bank’s
The ECB envisions a digital euro for retail use that could even be transferred offline using a digital wallet on people’s phones. Early designs call for a standard app, along with use through existing online banking apps.
It wouldn’t replace cash but add another way to hold euros.
Even after the proposal is made, there would be three years of testing. A decision to actually introduce the digital euro would only come after that and require EU approval.
Fabio Panetta, a member of the ECB’S executive board and head of the digital euro task force, says it wouldn’t replace cash and people would have the option, not the requirement, to use it.
“It would reduce dependence on a few dominant providers, increasing competition and resilience,” he told European lawmakers last month.
Europe’s banks have greeted the proposal with caution. They warn that without strict limits, digital euros could draw deposits out of commercial banks – depriving them of funding for things like business loans and mortgages.
Panetta has indicated holdings could be limited to the value of banknotes in circulation, around 3,000 to 4,000 euros per person.
The European Banking Federation supports payment autonomy but said a digital euro alone would not accomplish that without banks and payment services companies creating new and better ways to handle payments themselves.
“A retail digital euro, particularly if not able to offer a concrete value-added compared to existing electronic payments, is not an appropriate or sufficient tool to meet all the goals that have been put forward,” the group said.
Merchants, in theory, could push for greater adoption if they find taking payment in digital euros helps them avoid the fees charged by credit card companies, said Sandner of the Frankfurt School.