Banks and the ECB need to explore together the needs to be addressed by a digital euro and its design to ensure financial sovereignty for Europe and added value for its citizens.
Digital transformation is a reality in payments: competitive pan-European payment solutions emerge, as do private global stablecoin initiatives and increased role of BigTech. Only by working closely together, authorities and banks can successfully harness this transforming environment.
DIGITAL EURO: EBF VIEWS
EBF paper #1: Strategic considerations
The EBF takes note of the work that is done by the Eurosystem to investigate a digital euro that could be aimed at a retail audience, should the need arise. A central bank digital euro should first and foremost be a viable and optimal solution to a clearly defined unserviced need in the market, for which no other more efficient solution exists. In addition, it should benefit private individuals and corporates and the economy as a whole, while avoiding destabilizing the financial system. Therefore, before the ECB decides to issue a CBDE, it should be clear what a CBDE can contribute that is not already covered or covered by private payment and deposit solutions.
Taking into account their crucial position in the financial and payment systems, and for the financing of the economy, European banks welcome a continuous exchange with the ECB on the digital euro project. The underlying needs, possible – effective – alternatives under these objectives as well as the design principles should be further explored with representatives of the European society at large. EBF welcomes detailed discussions with sufficient time before a decision on a project launch.
The EBF stands ready to engage with the ECB in conducting additional assessments and applying investigative tools beyond the launched public consultation.
EBF paper #2: Impact on bank funding
A digital euro would need to benefit European citizens and the economy as a whole, while avoiding any destabilizing effect on the financial system. Moreover, in a possible digital euro ecosystem, it should be very clear how private sector payment and deposit solutions would go hand in hand with it.
Reflecting on the idea of limiting digital euro holdings to address negative consequences, in EBF paper #2 we share our views on the possible cyclical and structural disintermediation of bank funding. We also raise questions as to the implications of such disintermediation and the availability of alternative funding sources, while also looking at what this could mean for the role of the ECB itself.
EBF paper #3: How does a digital euro fit the payments landscape?
The digital euro project investigation phase is set to define what a digital euro could actually be and the purposes and use cases it could fulfill. However, it is already clear that a digital euro would impact the European payments landscape. The objective of increased European sovereignty can only be achieved with competitive payment methods offered to the public by European PSPs. One of the main goals of the starting investigation by the ECB should be to define whether a digital euro would support this objective and how in practice it would add value to the EU payments landscape. This would provide a very welcome clarification on how a digital euro will fit Europe’s already existing efficient, secure and well-functioning electronic payments market.
Substantial efforts have been deployed by policy makers and financial industry to create a Single Market for payments up to today. The EBF #3 paper takes a closer look at the expected impact by the digital euro on this Market, and what design aspects are essential to consider in return.