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ECB Addresses Banking Industry’s Concerns on Digital Euro

The European Central Bank (ECB) has addressed concerns raised by financial institutions regarding the role of the central bank digital currency (CBDC). In its report, the ECB emphasized that the digital euro will primarily serve as a means of payment and is not intended for investment purposes.

Three members of the ECB Executive Board, Piero Cipollone, Ulrich Bindseil, and Jürgen Schaaf, sought to allay banks’ concerns about disintermediation. The report underscored that the digital euro is not designed to supplant banks but rather to complement existing financial infrastructure.

According to a tweet by ECB colleague Georgina, the introduction of a digital euro could potentially benefit European payment service providers and banks. She highlighted that these providers would play a central role in distributing the digital euro and serving as the primary point of contact for users.

Georgina also stressed the importance of implementing fair compensation models for providers involved in distributing the digital euro, along with establishing digital euro holding limits to uphold financial stability.

Stablecoins, e-Money Institutions Pose Greater Risks than CBDCs: ECB

Moreover, the central bank highlighted that emerging disruptive payment methods like stablecoins and e-money institutions might pose a more significant threat to bank funding than a digital euro.

“Banks are focusing on the wrong aspects when they rely on studies that overlook the specified design features of a digital euro,” the ECB stated.

In doing so, banks neglect other challenges that require attention, the ECB added. Instead of reacting solely to “new and powerful” private competitors, banks should strive to offer compelling products and services that incentivize customers to retain their deposits with them, the ECB emphasized.

Furthermore, the Executive Board members disclosed that the ECB is progressing with its efforts to develop a digital euro. They stated, “We will continue refining design choices, addressing potential risks, and maximizing benefits.”

Furthermore, the ECB is taking banks’ concerns regarding funding seriously by proposing measures such as holding limits, access constraints, no remuneration, and a reverse waterfall approach.

“A digital euro would establish harmonized standards across Europe, allowing payment service providers to extend their services across borders and encompass the entire euro area,” the ECB stated.

In summary, Georgina emphasized that a digital euro would enhance the competitiveness and innovation of the EU payments system overall.

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