ECB’s Panetta says digital euro should be attractive but not ‘too successful’ – Bitcoin Finance News – News Couple

ECB’s Panetta says digital euro should be attractive but not ‘too successful’ – Bitcoin Finance News

The digital euro should be an attractive means of payment, but its design should prevent it from becoming successful as a store of value that threatens banks and private money, according to Fabio Panetta, a senior executive at the European Central Bank. Panetta emphasized that both this inconsistency as well as the need for a successful CBD release need attention.

European digital currency to supplement cash and be a Monterey Anchor

While cash currently provides people with access to central bank digital money, its importance in payments is declining as consumers increasingly prefer to pay digitally and shop online. Internet sales in the eurozone have doubled since 2015, and only about 20% of the cash stock is now used for payments, compared to 35% a decade and a half ago, ECB Executive Board member Fabio Panetta noted in a speech at the Elcano Royal Institute in Madrid.

The European Central Bank's Panetta says the digital euro should be attractive but not
Fabio Panetta, Member of the Executive Board of the European Central Bank.

“As people begin to use cash more as a store of value rather than as a means of payment, having a digital euro will enable them to continue to use central bank money as a medium of exchange in the digital age,” Panetta said in his speech, focusing on the future role of central bank digital currencies (CBDCs) . In his view, the digital euro and cash will complement each other to ensure that central bank money remains a monetary underpinning of the payments system.

To achieve this, the digital form of the euro must be attractive for regular use in payments, the ECB official believes. At the same time, its determination should prevent it from becoming “so successful as a store of value that it crowds out private money and increases the risk of bank runs.” Fabio Panetta emphasized in his comments:

While we have discussed at length the possibility of a digital euro being “too successful”, ironically we need to devote the same amount of attention to the risk that it will not be successful enough.

Panetta explained that efforts to issue a CBDC must meet certain conditions for success. Besides its appeal as “the only non-risk digital form of money”, the digital euro will need to facilitate digital payments wherever Europeans need it for this purpose. Moreover, merchants must ensure that consumers want to use it while intermediaries must find that the benefits of distributing it outweigh the costs.

Fabio Panetta insisted in the letter published by the European Central Bank that “developing a compelling value proposition for all stakeholders is critical to the success of the digital euro.” He added that this is a key element in the investigation phase of the Central Commercial Bank project launched by the bank earlier this year. The CEO noted:

Together at the technical level, the European Central Bank and the European Commission are reviewing a wide range of policy, legal and design questions arising from a potential introduction of a digital euro, including the role that the status of legal tender might play in achieving the desired network effects.

Digital Euro to be convenient and help privacy, Panetta claims

Fabio Panetta revealed that for consumers, the digital euro will provide “a free and convenient way to pay digitally anywhere in the eurozone.” He added that it would also increase privacy in digital payments because the European Central Bank, he said, had no interest in monetizing users’ data. In his view, compliance with anti-money laundering regulations will not conflict with the promotion of privacy.

The representative of the European Central Bank administration believes that the digital euro should not compete with digital payment services provided by the private sector and that intermediaries will be able to engage users by providing new services with the “digital euro from within” such as credit facilities and automated payments. Thus, smaller financial institutions and fintech companies will benefit from “a level playing field” and have a chance to compete with big tech companies, Panetta said.

The member of the Executive Board of the European Central Bank also sees the digital euro as supporting the international role of the common European currency and the independence of Europe in global payments. “Making it accessible to non-residents and interoperable with other central bank digital currencies could facilitate cross-border payments, which are currently fraught with high costs, low speeds and limited access,” Fabio Panetta noted.

He is convinced that the increasing supply of private digital currencies such as stablecoins and the wide availability of private digital payment methods will not make the digital euro redundant. He insisted, “With digitization at full speed, central banks must prepare for a digital future in which the demand for cash as a medium of exchange may weaken, requiring the convertibility of private money into cash to be complemented by the convertibility of digital money to the central bank.”

Dozens of central banking institutions around the world are exploring the potential issuance of digital currencies in response to the growing popularity of cryptocurrencies and the decline in the use of notes and coins. Besides the European Central Bank, these banks include the Federal Reserve and the Bank of Russia. The People’s Bank of China is arguably the most advanced project, with local trials already underway and plans to test the digital yuan in cross-border transactions.

Do you think a digital euro will be a successful CBD project? Share your predictions in the comments section below.

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Banks, CBDC, Central Bank, Costs, Cross Border, Digital Currency, Digital Euro, Europe, Eurozone, CEO, Fabio Panetta, Financial Institutions, Fintech, Means of Exchange, Payment Methods, Anchor, Cash, Official, Payments, Privacy, Project Speech Store Value

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