The European Central Bank (ECB) has recently disseminated a significant amount of informational material regarding the digital euro, including brochures, FAQs, and other easily accessible formats. However, amidst this effort, frustrations among bankers regarding excessive concerns and a perceived lack of innovation have come to light.
In columns published on February 19, ECB executives, led by board member Piero Cipollone, delved into discussions surrounding bank intermediation. Specifically, they addressed the confusion among banks regarding potential disintermediation resulting from the introduction of a central bank digital currency (CBDC) for the euro.
Despite incorporating mitigation measures into CBDC designs, various banking associations, think tanks funded by banks, and academics continue to publish research highlighting the risks associated with removing financial intermediaries from transactions. ECB authors highlighted design measures implemented for the digital euro to prevent large-scale transfers from commercial bank accounts to digital euro wallets, encouraging the use of digital euros for payments rather than investments.
In addressing concerns about the digital euro potentially causing a severe economy-wide banking crisis and banks losing deposits as a source of long-term refinancing, the authors offered original arguments. They criticized complaints about future digital euros in studies sponsored by the banking system, stating that these complaints overlook crucial variables such as central bank currency in circulation.
The authors also emphasized that central banks are not the primary threat to the banking industry, pointing to the rise of stablecoins, e-money institutions, and other narrow banking institutions, some backed by large technology companies. They concluded that focusing solely on the flaws of CBDCs detracts from addressing other challenges necessary to ensure stable financing through deposits.
In a longer and more technical version of their blog post available on the VoxEU website, the authors further delve into the intricacies of the topic. Additionally, ECB President Christine Lagarde has addressed concerns about the digital euro, dismissing conspiracy theories and emphasizing the importance of maintaining individual freedom in purchasing decisions. The ECB announced in October its entry into the preparatory phase of the digital euro project.
