FRANKFURT (Reuters) – Eurozone banks need a digital euro to respond to U.S. President Donald Trump's push to promote stablecoins, a form of cryptocurrency usually pegged to the U.S. dollar, European Central Bank Board member Piero said. Cipollone, Piero Cipollone said on Friday.
Trump said he would “promote the development and growth of legal and legitimate dollar-backed stablecoins around the world” as part of a broader crypto strategy he outlined in an executive order issued Thursday.
Cipollone said this would help lure even more customers away from banks and strengthen the case for the ECB to launch its own cryptocurrency in response.
“I guess the key word here (in Trump's executive order) is worldwide,” Cipollone told a conference in Frankfurt. “This solution, you all know, puts further banks out of business as they lose fees, they lose clients… that's why we need a digital euro.”
Stablecoins work similarly to money market funds in that they offer exposure to short-term interest rates in an official currency – almost always the US dollar.
A digital Euro in contrast would essentially be an online wallet guaranteed by the ECB but operated by companies such as banks.
It would allow people, even those without a bank account, to make payments. Payments would likely be capped at a few thousand Euros and not paid.
Banks have expressed concerns that a digital euro would empty their coffers as customers transfer some of their money to the safety of an ECB-guaranteed wallet.
The Central Bank of the Eurozone is currently experimenting with how a digital euro would work in practice. But it should only be launched once it approves legislation on the matter and it will make a final decision about its launch.
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 44 other countries, including Russia, China, Australia and Brazil are running pilots, according to the Atlantic Council think tank.
(Reporting by Francesco Canepa; Editing by Mark Heinrich)