Europe needs to embrace a digital version of its currency (or a digital euro) to stand strong against the rising popularity of stablecoins and the widespread use of payment systems from the United States.
That’s the message from Philip Lane, the Chief Economist at the European Central Bank (ECB).
According to a report, Lane believes that this move is vital for Europe to maintain its financial independence as the geopolitical landscape becomes more fragmented. He expressed worries about the potential risks of depending too much on payment methods that are not under European control.
Concerns Over Foreign Payment Systems
Lane pointed out the dangers of relying on payment systems originating outside of Europe. He suggests that this dependence could make the region vulnerable.
The increasing use of stablecoins, which are digital currencies often tied to the value of traditional currencies 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 become dominant, weakening the euro’s role 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 issuance of a digital euro as a means to provide a secure and universally accepted means of payment for all Europeans.
The new currency would be controlled within Europe, allowing the continent more control over its financial system. With its own digital currency, Europe might be able to cut back on payment services from abroad.
An image rendering of a digital euro. Source: Gemini Imagen.
Maintaining Europe’s Financial Autonomy
Lane underscored that in a more polarized world, it is important for Europe to protect its fiscal independence. He said a digital euro is an important step towards realizing this objective.
It would make sure that Europe possesses a sound payment system free from the rules or control of other countries. This step is regarded as integral to protecting Europe’s economic sovereignty in the future.
Counteracting Foreign Stablecoin Hegemony
The primary reason to promote the digital euro is in order to thwart stablecoins in other currencies dominating Europe.
The ECB fears that if these stablecoins in foreign currencies become heavily popular, then they would strip the euro of its status as the primary currency in Europe.
A digital euro would offer a European solution, providing that individuals and companies in Europe remain using and trusting the euro for their business.
The ECB feels that the forward-thinking initiative is required in order to defend the integrity and stability of the European financial system against emerging digital payment technologies.
Featured image from Gemini Imagen, chart from TradingView
