ECB’s Panetta: “too successful” digital euro could affect financial stability

The ECB is considering whether to issue – alongside euro banknotes – a digital euro: a digital form of money that, just like cash and unlike other means of payment, would be a claim on the central bank instead of a claim on a private intermediary.

In a speech, member of the ECB’s executive board Fabio Panetta, noted the numerous benefits of a digital euro, such as payments efficiencies and lower costs.

A digital euro, he said in the speech, would aim to support digitalization while continuing to give people choice in how they pay and ensuring their payments remain competitive and secure. It would be designed to be safe, costless, easily accessible and simple to use, thereby supporting financial inclusion. It would have the protection of privacy as a key priority, thereby helping to maintain trust in payments.

However, in the broader debate and in some responses to a public consultation by the ECB, a number of concerns have been raised about the potential impact of a digital euro on the financial system.

Paradoxically, a digital euro may prove too successful. If it is not properly designed, its main strengths – safety and liquidity – could affect monetary and financial stability on three fronts: first, financial intermediation and capital allocation in normal times; second, financial stability in times of crisis; and third, the functioning of the international financial system.

Read the full speech

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