The European Central Bank (ECB) is very pleased with the European Commission’s legislative proposals for a digital euro. ECB executive board member Fabio Panetta told the European Parliament’s Committee on Economic and Monetary Affairs in a speech on Sept. 4 that the proposals “put Europe in the position” when it comes to central bank digital currency (CBDC) development. the forefront of advanced economies”, potentially hampering the dominance of private banks in the development finance sector and the ills it implies.
The European Commission (EC) made its proposal public on June 28. Cryptocurrency critic Panetta called the European Commission’s proposal for a euro CBDC “a new paradigm for maintaining monetary sovereignty” that would ensure that Europeans always have access to public payment options, whether cash or digital, even if private payment services “Closed-loop solutions are becoming more common”. Panetta compared private payment systems to private messaging, where users are forced to join the most popular systems.
Executive board member Fabio Panetta said the digital euro would be a new form of central bank money. Legislators are now required to ensure it replicates cash’s key characteristics in the digital realm, especially its privacy https://t.co/nQJzYylwpV
— European Central Bank (@ecb) September 4, 2023
The European Commission has proposed giving the digital euro legal tender status and making payments in it mandatory. Panetta also praised the European Commission’s privacy proposals for a digital euro. He pointed out:
“The Eurosystem will not be able to view the personal details of digital euro users, nor link any payment information to an individual. Intermediaries will only see the user information required for onboarding and compliance with existing regulations.”
“Additionally, the possibility of offline payments would provide cash-like privacy, with neither intermediaries nor central banks processing payments,” Panetta said.
The proposals also include sound pricing policies and allow the ECB to maintain balance in the financial system through tools such as holding quotas. Panetta said:
“Let me stress once again that the launch of a digital euro is an opportunity, not a risk, for the European financial sector.”
The alternative to introducing a CBDC is not to maintain the status quo. Instead, it is losing out to new private solutions that could affect the economy, Panetta said. He cited PayPal’s recently launched PayPal USD (PYUSD) stablecoin as an example of potential risks.
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Private payment service providers seek to gain market share and have no incentive to limit the scope of their services or make them compatible with other services. As a result, private services could gain a monopoly in the market, as has happened before, Panetta explained.
In contrast, a digital euro “would pay due attention to the orderly adjustment of the financial sector while providing a pan-eurozone innovation platform for payment service providers”.
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