In Frankfurt on January 24th, European Central Bank board member Piero Cipollone stated that Euro zone banks require a digital euro to counter U.S. President Donald Trump's efforts to promote stablecoins, a type of cryptocurrency tied to the U.S. dollar.
Trump outlined in an executive order his intention to support the growth of legitimate dollar-backed stablecoins globally, prompting Cipollone to emphasize the necessity of a digital euro to prevent further diversion of customers from traditional banks.
Cipollone highlighted the global implications of Trump's order, stating, This solution disintermediates banks, leading to loss of fees and clients – hence the need for a digital euro.
Stablecoins resemble money market funds, offering exposure to short-term interest rates in major currencies like the U.S. dollar. In contrast, a digital euro would provide an ECB-guaranteed online wallet managed by entities like banks, enabling cashless transactions for individuals without bank accounts, with capped holdings likely non-interest bearing.
Banks have voiced concerns regarding potential funds outflows to a digital euro, threatening their financial stability. The ECB is currently testing the feasibility of a digital euro, pending legislative approval by European authorities for a final decision on its launch.
Trump's order additionally bars the Federal Reserve from issuing a central bank digital currency (CBDC). Countries including Nigeria, Jamaica, and the Bahamas have already introduced digital currencies, while others like Russia, China, Australia, and Brazil are conducting pilot projects, as reported by the Atlantic Council.