- The European Central Bank (ECB) has emphasized the necessity of a digital euro
- The move would counteract US President Donald Trump’s recent executive order promoting dollar-backed stablecoins over a US Central Bank Digital Currency (CBDC)
- ECB Executive Board member Piero Cipollone expressed concerns that Trump’s actions could lead to European banks losing clients and fees
ECB Executive Board member Piero Cipollone has stated that US President Donald Trump’s decision to abandon plans for a digital dollar should spur the development of a digital euro. Trump signed an executive order last week to develop stablecoins rather than rely on a US CBDC, and Cipollone is worried that this could result in European banks losing clients and fees, thereby reinforcing the argument for introducing a digital euro. The ECB is actively exploring the implementation of a digital euro, with a final decision contingent upon legislative approval from European lawmakers.
Trump Protects Americans From “Government Tyranny”
Donald Trump signed the executive order preventing the development of a CBDC on January 23, with the order aimed at promoting the creation and growth of lawful and legitimate dollar-backed stablecoins worldwide instead. Trump promised to scupper any digital dollar plans during an address in New Hampshire while on the campaign trail:
Tonight, I am also making another promise to protect Americans from government tyranny. As your president, I will never allow the creation of a central bank digital currency.
Trump’s executive order made good on this promise, and in response, Cipollone told a conference in Frankfurt that the ECB was now concerned about the global implications of the US policy:
I guess the key word here [in Trump’s executive order] is worldwide. This solution, you all know, further disintermediates banks as they lose fees, they lose clients… That’s why we need a digital euro.
Cipollone emphasized that the promotion of dollar-backed stablecoins could lure customers away from traditional banks, thereby strengthening the case for the ECB to launch its own digital currency.
ECB Looking at Practical Implementation of Digital Euro
The ECB is currently experimenting with how a digital euro would function in practice. The currency would essentially be an online wallet guaranteed by the ECB but operated by companies such as banks and would allow people, even those without a bank account, to make payments, with holdings likely capped at a few thousand euros and not remunerated.
However, banks have expressed concerns that a digital euro could lead to a reduction in their deposits, as customers might transfer some of their cash to the safety of an ECB-guaranteed wallet. The final decision on whether to launch a digital euro will depend on the approval of European lawmakers.
Nigeria, Jamaica, and the Bahamas have already launched digital currencies, and a further 44 countries, including Russia, China, Australia, and Brazil, are running pilots.