FRANKFURT (Reuters) – Euro zone banks need a digital euro to respond to U.S. President Donald Trump’s push to promote stablecoins, a type of cryptocurrency typically pegged to the U.S. dollar, European Central Bank board member Piero Cipollone said on Friday.
Trump said he would “promote the development and growth of lawful and legitimate dollar-backed stablecoins worldwide” as part of a broader crypto strategy that he sketched out in an executive order issued on Thursday.
Cipollone said this would help lure even more customers away from banks and strengthen the case for the ECB to launch its own digital currency 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, further disintermediates banks 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 – nearly always the U.S. dollar.
A digital euro, by contrast, would essentially be an online wallet guaranteed by the ECB but operated by companies such as banks.
It would allow people, even those who don’t have a bank account, to make payments. Holdings would likely be capped at a few thousand euros and not remunerated.
Banks have expressed concerns that a digital euro would empty their coffers as customers transfer some of their cash to the safety of an ECB-guaranteed wallet.
The euro zone’s central bank is currently experimenting with how a digital euro would work in practice. But it will only make a final decision on whether to launch it once European lawmakers approve legislation on the matter.
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 a further 44 countries, including Russia, China, Australia and Brazil are running pilots, according to the Atlantic Council think tank.