FRANKFURT (Reuters) – Euro zone banks need a digital euro to answer U.S. President Donald Trump’s push to advertise stablecoins, a style of cryptocurrency typically pegged to the U.S. dollar, European Central Bank board member Piero Cipollone said on Friday.
Trump said he would “promote the event and growth of lawful and legit dollar-backed stablecoins worldwide” as a part of a broader crypto strategy that he sketched out in an executive order issued on Thursday.
Cipollone said this might help lure much more customers away from banks and strengthen the case for the ECB to launch its own digital currency in response.
“I suppose the important thing word here (in Trump’s executive order) is worldwide,” Cipollone told a conference in Frankfurt. “This solution, you all know, further disintermediates banks as they lose fees, they lose clients…That is why we want a digital euro.”
Stablecoins work similarly to money market funds in that they provide exposure to short-term rates of interest in an official currency – nearly all the time the U.S. dollar.
A digital euro, against this, would essentially be a web based wallet guaranteed by the ECB but operated by corporations equivalent to banks.
It might allow people, even those that do not have a checking account, to make payments. Holdings would likely be capped at a couple of thousand euros and never remunerated.
Banks have expressed concerns that a digital euro would empty their coffers as customers transfer a few of their money to the protection of an ECB-guaranteed wallet.
The euro zone’s central bank is currently experimenting with how a digital euro would work in practice. But it should only make a final decision on whether to launch it once European lawmakers approve laws on the matter.
Trump’s executive order also prohibited the Federal Reserve from issuing its own central bank digital currency (CBDC).
Nigeria, Jamaica and the Bahamas have already launched digital currencies and an extra 44 countries, including Russia, China, Australia and Brazil are running pilots, in accordance with the Atlantic Council think tank.
(Reporting By Francesco Canepa; editing by Mark Heinrich)