The European Central Bank should press ahead with a digital euro to prevent fragmentation in Europe’s payments system and preserve the role of central bank money as finance becomes increasingly digital, ECB Executive Board member Piero Cipollone said on Tuesday.
Cipollone said Europe risked becoming overly dependent on foreign-controlled payment infrastructure and could see its monetary sovereignty weakened if it failed to provide a pan-European digital payment option. He also warned that tokenised finance could develop across closed and incompatible platforms, potentially undermining the “singleness” of money.
CBDC | European Parliament Backs Digital Euro to Reduce U.S Dollar Stablecoin Dominance in Payments
The ECB’s proposed digital euro would provide a common payment infrastructure for transactions across the euro area, while allowing private payment providers to build services on top of it.
The central bank is also seeking to address concerns that a digital euro could drain deposits from commercial banks. ECB analysis of 2,025 banks found that holding limits between €500 and €3,000 would have a limited impact on banks’ liquidity and funding under normal conditions.
Under a €3,000 limit, the ECB estimates that the aggregate liquidity coverage ratio would fall from 166% to 163% when excluding deposit inflows linked to the declining use of cash. The net stable funding ratio would fall from 128% to 127%.
REGULATION | The European System of Central Banks Seeks Minimum Liquidity Thresholds for Stablecoin Reserves
The ECB estimates that broader digitalisation could generate €127 billion in additional bank deposits by 2034, more than offsetting estimated digital-euro-related outflows under its business-as-usual scenario for holding limits up to €3,000.
The ECB has not yet decided whether to issue the digital euro. The legislative process is under way, with the central bank aiming to be ready for a potential launch in 2029 if legislation is completed by the end of 2026.
A 12-month digital euro pilot is planned to begin in the second half of 2027, with 36 payment service providers selected to participate.
Cipollone also highlighted the ECB’s wider push into tokenised finance, including Pontes, which allows tokenised transactions to be settled in central bank money, and Appia, a planned framework for connecting tokenised central bank money, bank deposits and other regulated assets.
INTRODUCING | The European Central Bank (ECB) Launches On-Chain Institutional Settlement System for Tokenised Assets
The ECB says the broader objective is to keep central bank money at the centre of Europe’s financial system while giving private firms infrastructure to develop and compete across the region.
STABLECOINS | European Central Bank (ECB) Opens Digital Euro Pilot to Online and Mobile Merchants
Stay tuned to BitKE for global crypto regulatory updates.
Join our WhatsApp channel here.
Follow us on X for the latest posts and updates
Join and interact with our Telegram community
________