.svg)
The European Central Bank (ECB) has continued to court lawmakers on the digital euro, but doubts remain over a central bank digital currency (CBDC), despite broad support among lawmakers for reducing reliance on foreign providers.
The digital euro has long been a thorn in Brussels' side, and nowhere has it received more criticism among the EU’s co-legislators than Members of the European Parliament (MEP), who have ranged from unconvinced to entirely opposed during the project’s existence.
The most recent hearing between the ECB and the Economic and Monetary Affairs (ECON) Committee appeared to continue that.
“Excessively relying on foreign providers undermines our resilience and compromises our monetary sovereignty,” said Piero Cipollone, an executive board member at the ECB, during the hearing.
“It also underscores the urgent need for a digital euro. Failing to act would not only expose us to significant risks, but also deprive us of a great opportunity.”
Seemingly, the impact on geopolitics has swayed the ECON Committee towards the necessity of some sort of solution. However, they have not fully arrived at the idea of that solution being the digital euro.
Durning the hearing, Nikos Papandreou, an MEP from Greece, looked for answers from Cipollone on the impact that the digital euro may have on the payments industry.
Cipollone did not answer the question directly, but said in his response that “we have some evidence” regarding the use of digital euro, what needs to be remembered is that “by using payment services not provided by foreign providers, we would keep money in Europe”.
“This money could stay with us if we, if our payment service providers were able to regain some market share in this space.”
Despite his concerns, he also came out relatively in favour of the project, and suggested that the predicted negative impact of the digital euro on private payments players may not come to fruition.
He suggested that if consumers were to put their money into digital euro accounts in the event of a bank run, “it would stay within the system”, rather than a negative consequence like being withdrawn at an ATM or taken to a bank abroad.
This is as it would remain on the ECB’s ledger, he said. “The digital euro, in fact, increases stability,” he said.
“The chances of a run are even less, as there is even more security for the individual,” he said.
He added that the private sector “has had 20 years to create a digital euro”, but because it is a large infrastructure project, has not taken that risk. “It needs the public sector, it needs the ECB, and the costs, as we know, will not be from the taxpayer, but from the ECB itself.”
“And even if the private sector did run a digital euro, we want sovereignty. Who is going to own it? A French man? A Spanish man? Or will someone Chinese buy it?” he said.
As has become tradition during the public hearings between the ECB and MEPs, there was plenty of contention about how the digital euro project should progress. For example, Markus Ferber, a German MEP and at times digital euro sceptic, said that “there is still quite a lot of scepticism out there”.
Meanwhile, French MEP Gilles Boyer said that there “is quite a lot of fear and imagination surrounding this file”.
“I think we do need a digital euro … but personally I don’t think it will address all of the concerns we have,” he said.
Meanwhile, right-wing Dutch MEP Auke Zijlstra said he was concerned about “the dependence that the European market has on Visa and Mastercard”, but is uncertain that the digital euro was the best way forward.
“If there is talk of dominance of a market, you need to apply the European rules. If those companies apply tariffs that are too high, you need to look at the Interchange Fees Regulation,” he said.
He also questioned whether authorities could be improved at member state level. “It is not the ECB’s job to bring a project onto the market.”
The MEP suggested that EU legislators look at payment methods such as iDEAL in his home country. “Give them the chance they need, instead of bringing new competitors onto the market.”
However, the ECB official rebuffed the idea that they are competing with the private sector. “These solutions will be reinforced by the digital euro,” he said. “This will provide an infrastructure that will allow the providers of those services to be able to provide their services throughout Europe.”
The Italian economist added that “we all agree we need one or more pan-European solutions that would help people to pay freely and choose the providers that they want to fulfil their needs, so here we are not talking about a competition between the private sector and the public sector.”
Rather, the digital euro “would be a catalyst” to scale up the private sector.
