- European lawmakers have raised concerns about the European Central Bank’s (ECB) digital euro initiative following a recent payment system outage
- The malfunction in the ECB’s Target 2 (T2) system last month disrupted transactions, prompting questions about the ECB’s capability to manage a digital currency
- Despite these issues, the ECB maintains that the digital euro will operate on a more reliable platform, akin to its TIPS system
The ability of the European Central Bank (ECB) to operate a digital euro has been called into question following a major payment outage last month. A recent technical failure in the European Central Bank’s Target 2 (T2) payment system prevented banks from settling transactions for most of the day, affecting thousands of households and traders. This incident has intensified skepticism regarding the ECB’s ability to manage a digital currency infrastructure, but the bank has promised that a stablecoin will be more reliable.
T2 Outage Prompts Fears
The failure of the ECB’s T2 payment system, which happened in late February, meant salaries and welfare funds were delayed for thousands of people across the continent. Experts warned that if the same disruption had struck or persisted into the following day, the mayhem could have hit millions of people and businesses and strained the banking system.
The temporary failure of T2 has led to members from various European Parliament groups voicing their apprehensions over the ECB’s ability to operate a digital euro, with Markus Ferber of the European People’s Party, a vocal critic:
This instance is a blow to the ECB’s credibility. People will ask legitimate questions how the ECB will be able to run a digital euro when they cannot even keep their day-to-day operations running smoothly.
Similarly, Rasmus Andresen, a Green party member on the parliamentary committee overseeing the ECB, emphasized the need for the central bank to regain public trust to ensure the digital euro’s success. He remarked that without restoring confidence, the digital euro project could be “at risk of failure.”
Lawmakers’ concerns highlighted the critical need for the ECB to demonstrate robust operational capabilities and to build confidence among stakeholders.
ECB Preaches Calm
In response to these concerns, an ECB official clarified that the digital euro would function more like the institution’s TIPS system, which operates continuously and handles numerous small transactions daily with high reliability. Notably, TIPS experienced only minor delays during the T2 outage, although this will do little to quell critics.
Despite the ECB’s reassurances, legislative support remains uncertain. The European Commission introduced digital euro legislation in June 2023, but progress has been sluggish due to ongoing skepticism from some lawmakers and banking professionals.
The ECB aims to have the necessary legislation in place by autumn to proceed with the digital euro project.
