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The digital euro is expected to consider orderly adjustments in the financial sector while also offering payment service providers a platform for innovations.
The European Central Bank (ECB) has expressed its support for the legislative proposals of the European Commission regarding the digital euro. Fabio Panetta, an executive board member of the ECB shared the view of the bank on Monday while speaking to the European Parliament’s Committee on Economic and Monetary Affairs. According to Panetta, the proposals have been very crucial in making Europe a global leader when it comes to central bank digital currency (CBDC) development. Additionally, he said that the proposals also hold the potential to thwart private dominance of the financial sector and the problems that come with it.
EC Proposals for the Digital Euro
On June 28, the European Commission (EC) floated its proposals for the euro CBDC and even made it public. The proposal first saw the EC suggesting that the digital euro be given the status of legal tender, making it a lawful means of payment. Then, it also proposed privacy and pricing policies that have now been hailed by the ECB. Speaking about privacy, Panetta said:
“The Eurosystem would be unable to see the personal details of digital euro users or connect any payment information to private individuals.”
In line with pricing, the EC proposed policies for the digital euro that allow the ECB to maintain a balance in the financial systems with tools like holding limits. And in response to that, Panetta says a digital euro should not be seen as a risk for the European financial sector, but rather an opportunity.
Buttressing his point, he said not introducing a CBDC means that Europe would continue to lose ground to new private solutions. And that could impact the economy, Panetta said.
Citing an example of a potential risk, Panetta mentioned PayPal’s recently introduced PayPal USD (PYUSD) stablecoin. According to him, private payment service providers such as PayPal have no interest in limiting their range of services. All they care about is gaining a significant market share or having a monopolistic grip on the financial markets.
Panetta believes that the digital euro would do better in this regard by paying attention to orderly adjustments in the financial sector. That is while it also offers payment service providers a platform for innovations with pan-euro area reach.