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According to European Central Bank representatives, a potential digital euro does not pose a risk to savers.
The European Central Bank, or ECB, has been looking into the feasibility of introducing a digital euro project to supplement current central bank money over the next five years. However, while high-profile figures such as ECB President Christine Lagarde have been largely optimistic about the possibility, officials from Germany’s Bundesbank have remained sceptical.
ECB board member Fabio Panetta and fellow official Ulrich Bindseil tried to address some of the Germans’ concerns in a recent op-ed for the Frankfurter Allgemeine Zeitung:
“The ECB is by no means planning to use a digital euro to enforce interest rates that are significantly more negative. As long as there is cash, it will always be able to be held at an interest rate of zero percent.”
Panetta and Bindseil’s remarks echoed the Bundesbank’s previous warnings that a digital euro may be “catastrophic for savers,” as well as economist Richard Werner’s belief that the ECB’s interest in a digital euro would syphon off vital deposit-taking activity from commercial banks.
Nonetheless, Panetta and Bindseil suggested that the digital euro’s architecture should guarantee that it did not conflict with bank deposits, referring to earlier calls for limits on citizens’ digital euro holdings. Most importantly, they emphasised the project’s significance in ensuring the Eurozone’s financial stability and stability in the face of foreign corporations and other international actors:
“We have to prevent European payment transactions from being dominated by providers outside Europe, such as global technology giants who will offer art currencies in the future. […] By preparing for a digital euro, we are also securing the autonomy of Europe. It is a safeguard in the event that undesirable scenarios occur.”
The priority placed by Panetta and Bindseil explicitly alludes to Facebook’s long-standing efforts to introduce a stablecoin backed by fiat currency. Meanwhile, rising economic forces like China are still way ahead of the curve, with their own central bank digital currency.
German Finance Minister Olaf Scholz recently called Facebook’s Diem stablecoin plan, rebranded from its previous name, Libra, a “wolf in sheep’s clothing.” He repeated that the German government would “not support its entrance into the industry,” noting regulatory threats that had not been properly discussed.