2 - 4 minute read
The European Central Bank (ECB) has been considering the issuance of a digital euro, but the possibility of political opposition could still be a decisive obstacle, according to ECB board member Fabio Panetta. Speaking to the European Parliament’s Economic and Monetary Affairs Committee, Panetta stated that a political decision to issue a digital euro should be made and then the central bank should be ready to respond. Panetta also urged lawmakers to pass new laws making the digital euro legal tender, implying that merchants who accept digital payments would also have to take the CBDC. The ECB has already broached this issue with finance ministers.
Panetta cited ECB research that suggests citizens see the ability to pay anywhere as the “most important feature” of a CBDC. The ECB is also considering how to grant access to around 5% of the population who don’t have or want a bank account, including conducting identity checks via Post Offices, online, or through other intermediaries.
“We will not make mistakes, but I think it is good that others want to check this.”
During the debate, Jonás Fernández, ranking member on the committee for his center-left Socialists and Democrats party, queried the initiative, asking what advantages would make the ECB want to continue working on this project. Though lawmakers express increasing doubts about the value of a central bank digital currency (CBDC), Panetta seems undeterred, stating that scrutiny of his ideas is welcome.
If the European Parliament decides not to go ahead with the digital euro, the ECB cannot decide autonomously or independently to progress. As such, traders should look out for any developments from the European Parliament regarding the digital euro, as it could have a significant impact on the asset in question.
The Bottom Line
The ECB’s consideration of a digital euro faces increasing scrutiny from lawmakers, who are questioning the value of a CBDC. The political opposition could still prove to be a decisive obstacle, and traders should keep a close eye on any developments from the European Parliament.