ECB Hopes U.S. Crypto Plan Will Expedite Digital Euro Legislation

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The European Central Bank (ECB) sees U.S. President Donald Trump’s backing of stablecoins pegged to the dollar as a potential catalyst for advancing legislation on the digital euro, ECB board member Piero Cipollone told Reuters.  

The ECB has positioned its digital euro as a secure, central bank-backed online payment method that reduces reliance on dominant U.S. payment providers like Visa and PayPal. Cipollone noted that Trump’s endorsement of globally accessible, dollar-based stablecoins adds urgency to the EU’s efforts, as it could introduce yet another U.S.-controlled payment system.  

While the European Commission proposed legislation for the digital euro in June 2023, progress has stalled due to skepticism from lawmakers and banks. Cipollone believes growing political awareness may accelerate the process, with hopes that the EU Parliament and Council will finalize discussions before the summer. This would allow new regulations to be in place by November, when ECB policymakers are expected to vote on whether to launch the digital euro.  

Acknowledging the complexity of political negotiations, Cipollone emphasized that swift action would be ideal but understands other priorities. However, EU lawmaker Markus Ferber suggested that, at best, Parliament might have a report ready by summer.  

Stablecoins, like money market funds, offer exposure to official currency interest rates while also functioning as a payment method. Cipollone expressed concern that the widespread use of U.S. stablecoins in Europe could divert deposits from European banks to the U.S.  

"If Europeans start using stablecoins for payments, most of which are U.S.-based and denominated in dollars, it could shift deposits from Europe to the U.S.," he warned.  

European banks have similar concerns about a digital euro potentially pulling customer deposits into ECB-backed wallets. To mitigate this, the ECB has proposed capping holdings at a few thousand euros and ensuring they remain non-interest-bearing.  

Several countries, including Nigeria, Jamaica, and the Bahamas, have already launched central bank digital currencies (CBDCs), while 44 others—such as China, Russia, Australia, and Brazil—are running pilot programs, according to the Atlantic Council think tank.  

In contrast, Trump has barred the U.S. Federal Reserve from issuing its own CBDC.

Paraphrasing text from "Reuters" all rights reserved by the original author.