Europe must embrace a digital version of its currency (or a digital euro) to face strong against the rising popularity of stablecoins and the widespread use of payment systems from the USA.
That’s the message from Philip Lane, the Chief Economist on the European Central Bank (ECB).
In keeping with a report, Lane believes that this move is significant for Europe to take care of its financial independence because the geopolitical landscape becomes more fragmented. He expressed worries concerning the potential risks of depending an excessive amount of on payment methods that usually are not under European control.
Concerns Over Foreign Payment Systems
Lane identified the dangers of counting on payment systems originating outside of Europe. He suggests that this dependence could make the region vulnerable.
The increasing use of stablecoins, that are digital currencies often tied to the worth of traditional currencies just like the US dollar, also presents a challenge to the euro’s standing.
Lane thinks that if Europe doesn’t act, these foreign-controlled options could turn out to be dominant, weakening the euro’s role within the economic system.
As of today, the market cap of cryptocurrencies stood at $2.7 trillion. Chart: TradingView
Digital Euro As A Secure Solution?
The ECB sees the issuance of a digital euro as a method to supply a secure and universally accepted technique of payment for all Europeans.
The brand new currency can be controlled inside Europe, allowing the continent more control over its economic system. With its own digital currency, Europe might give you the chance to in the reduction of on payment services from abroad.
A picture rendering of a digital euro. Source: Gemini Imagen.
Maintaining Europe’s Financial Autonomy
Lane underscored that in a more polarized world, it will be significant for Europe to guard its fiscal independence. He said a digital euro is a crucial step towards realizing this objective.
It might make certain that Europe possesses a sound payment system free from the foundations or control of other countries. This step is considered integral to protecting Europe’s economic sovereignty in the long run.
Counteracting Foreign Stablecoin Hegemony
The first reason to advertise the digital euro is in an effort to thwart stablecoins in other currencies dominating Europe.
The ECB fears that if these stablecoins in foreign currency echange turn out to be heavily popular, then they might strip the euro of its status as the first currency in Europe.
A digital euro would offer a European solution, providing that individuals and corporations in Europe remain using and trusting the euro for his or her business.
The ECB feels that the forward-thinking initiative is required in an effort to defend the integrity and stability of the European economic system against emerging digital payment technologies.
Featured image from Gemini Imagen, chart from TradingView
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