ECB execs respond to banks’ objections to digital euro, suggest priorities


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The European Central Bank (ECB) has been producing plenty of informational material about the digital euro lately, much of it in the form of brochures, FAQs and other accessible formats. As they do so, the bankers’ frustration with overblown fears and the cold reception the innovation has been given is beginning to show.

ECB executives, including board member Piero Cipollone, published a column in two versions on Feb. 19 addressing issues of bank intermediation. Specifically, they discuss banks’ perceived confusion about disintermediation potentially resulting from the introduction of a euro central bank digital currency (CBDC):

“Despite the explicit inclusion of mitigation measures in CBDC design, banking associations, bank-sponsored think tanks and scholars have continued to publish studies emphasising the risks associated with eliminating financial intermediaries from transactions.”

The authors briefly describe on the ECB blog several measures designed into the digital euro to prevent mass transfers of money from commercial bank accounts into digital euro wallets. These design elements encourage the use of the digital euro for payments rather than investment and the authors pointed out that banks could compete to retain deposits by raising their interest rates.

The authors provide counterarguments to claims that introducing the digital euro could cause an acute economy-wide banking crisis and that banks risk losing deposits as a source of refinancing in the long term.

Related: Adopting CBDC could destabilize banks, help households, US Treasury study says

Their argument about banknotes may be somewhat more original. “Persistent complaints regarding future volumes of digital euro in studies sponsored by the banking system are not looking at the right variable (which is central bank money in circulation),” they wrote.

Furthermore, central banks are not the biggest threat to the banking industry:

“Stablecoins, e-money institutions and other narrow bank constructs, some sponsored by big tech companies with huge customer bases, do not care about the role of banks in the economy.”

By concentrating on the perceived shortcomings of CBDC, banks “ignore the many other challenges they need to address to ensure stable funding through deposits,” the authors conclude.

A longer, more technical version of the blog post can be found on the VoxEU website.

ECB president Christine Lagarde referred in a speech before a European Parliament committee is September to “the conspiracy theory that abounds about this as if, you know, Big Brother was going to suddenly determine what you buy when you buy it and how restricted it should be.”

The ECB announced in October that it was moving into the preparation phase of the digital euro project in October.

Cipollone’s coauthors, Ulrich Bindseil and Jürgen Schaaf, published a blog post in on the ECB website in November 2022 called “Bitcoin’s Last Stand.”

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