The European Central Bank (ECB) is making great strides towards the digital euro. The digital euro is one Central bank digital currency (CBDC), a cryptocurrency issued by the central bank. In a speech on September 4th, Fabio Panetta, member of the Executive Board of the ECB, expressed his optimism about the upcoming digital euro. He believes that the European CBDC will solve many problems.
🧵 A digital euro would be a new form of central bank money, says board member Fabio Panetta. It is now up to legislators to ensure that the key characteristics of cash are replicated in the digital realm, particularly its privacy
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— European Central Bank (@ecb) September 4, 2023
Does the digital euro offer a solution?
Panetta says the European payments system is currently in the hands of a select few who have a monopoly on the payments market. This monopoly does not contribute to economic stability and, according to Panetta, does not bring any advantages for other market participants.
The digital euro could solve this problem, he believes. It could “offer a new paradigm for ensuring monetary sovereignty”. Panetta is evidently aware of the criticism and concerns surrounding CBDCs. In his speech, he addressed concerns about privacy issues.
“The Eurosystem will not be able to view personal data of users of the digital euro or to assign payment information to specific individuals. Agents can only see the user information needed for onboarding and fulfilling existing requirements.”
According to Panetta. He emphasizes that the digital euro is “not a risk, but an opportunity for the European financial system”.
The European CBDC is coming
The alternative of a European CBDC is to keep the status quo. Panetta says that would be catastrophic. According to him, the existing players in the payments industry are only concerned with increasing their market share. This leads to a very fragmented system. It’s clear what alternative Panetta has in mind.
“The digital euro will lead to major changes in the financial sector and will provide a platform for payment services to innovate in the eurozone.”
It is not yet clear when the digital euro will come. However, the ECB seems to be putting the finishing touches and preparing governments and the European Parliament for the changes ahead.