The European Central Bank (ECB) is optimistic that U.S. President Donald Trump’s inclination towards cryptocurrencies pegged to the U.S. dollar could expedite the legislative support for the digital euro, according to ECB board member Piero Cipollone in an interview with Reuters. The ECB has put forward its digital currency, a virtual wallet backed by the central bank, as an electronic mode of payment that circumvents reliance on major U.S. corporations like Visa and PayPal.
Cipollone perceives Trump’s endorsement of globally accessible stablecoins attached to the dollar as a potential catalyst for yet another U.S.-manufactured payment tool, thereby injecting urgency into the digital euro initiative. The European Commission proposed digital euro legislation in June 2023, but progress has been sluggish due to skepticism from some legislators and bankers.
“The political landscape is growing more vigilant about this,” Cipollone asserted on Wednesday. “We could potentially witness a swift progression in the process.”
Cipollone anticipates that the EU Parliament and Council will conclude work on the digital euro law before the summer, creating a pathway for discussions with the Commission. This would allow the new regulations to be solidified by November when ECB policymakers are scheduled to vote on the launch of the digital currency.
“Political procedures are intricate and there’s a lot at stake,” said Cipollone. “We’d prefer sooner rather than later, but we fully comprehend their necessities.”
Regarding the timeline, EU lawmaker Markus Ferber suggested that a report might be ready by summer at the earliest. Stablecoins, akin to money market funds, offer exposure to short-term interest rates in an official currency and can also facilitate payments.
Cipollone expressed concern about the proliferation of U.S. stablecoins as a payment method, as it could potentially lead to a diversion of deposits away from European banks. “If Europeans begin using stablecoins for payments, given that the majority are American and dollar-based, it would result in a transfer of their deposits from Europe to the U.S.,” he explained.
Bankers are apprehensive that a digital euro could drain their reserves as clients move some of their money to the safety of an ECB-backed wallet. To mitigate these fears, the ECB has indicated that holdings would probably be limited to a few thousand euros and would not earn interest.
Central Bank Digital Currencies (CBDCs) have been launched in countries like Nigeria, Jamaica, and the Bahamas, and 44 other nations, including Russia, China, Australia, and Brazil, are conducting pilot projects, as reported by the Atlantic Council think tank. In contrast, Trump has prohibited the U.S. Federal Reserve from issuing its own CBDC.
