Europe must assume a digital version of its currency (or a digital euro) in order to stand strongly against the increasing popularity of stable coins and the widespread use of payment systems from the USA.
This is the message of Philip Lane, the chief economist of the European Central Bank (ECB).
According to a report, Lane believes that this step for Europe is of crucial importance in order to maintain its financial independence, since the geopolitical landscape is more fragmented. He commented on the potential risks of too much payment methods that are not under European control.
Consideration about foreign payment systems
Lane pointed out the dangers that rely on payment systems that come outside of Europe. He suggests that this dependency could make the region susceptible.
The increasing use of stable coins, which are digital currencies, which are often bound to the value of traditional currencies such as the US dollar, is also a challenge for the reputation of the euro.
Lane believes that if Europe does not act, these foreign controlled options could become dominant, which weakens the role of the euro in the financial 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 output of a digital euro as a means of providing a secure and generally recognized means of payment for all Europeans.
The new currency would be controlled in Europe, which enables the continent more control over its financial system. With its own digital currency, Europe can possibly reduce payment services from abroad.
An image rendering of a digital euro. Source: Gemini Imagen.
Maintaining the financial autonomy of Europe
Lane underlined that it is important for Europe to protect its fiscal independence. He said that a digital euro was an important step to realize this goal.
It would make sure that Europe has a solid payment system that is free from the rules or control of other countries. This step will be considered essential for the protection of the economic sovereignty of Europe in the future.
Counteract foreign stablecoin hegemony
The main reason for promoting digital euros is to thwart stable coins in other currencies that dominate Europe.
The ECB fears that these stable coins in foreign currencies, which are very popular, would remove the euro of their status as the main currency in Europe.
A digital euro would offer a European solution, provided that individuals and companies in Europe continue to use the euro for their business and trust.
The ECB is of the opinion that the future -oriented initiative is necessary to defend the integrity and stability of the European financial system against emerging digital payment technologies.
Selected picture of Gemini Imageen, Diagram from Tradingview
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