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ECB to Issue a Digital Euro If the Private Sector Fails to Deliver Faster & Cheaper Cross-Border Payments

December 7, 2019

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ECB to Issue a Digital Euro If the Private Sector Fails to Deliver Faster & Cheaper Cross-Border Payments

In a recent internal intel exchange between the European Central Bank (ECB) and Bloomberg’s Bureau Chief Nikos Chrysoloras, who was also recently appointed as the new director of the Greek ANA-MPA agency, the ECB expressed its willingness to develop and deploy a digital version of Euro, based on concerns that point out domestic private settlement brokers are failing to stay ahead of the emerging digital cross-border payments scene.

The ECB makes clear that recent technological advancements are shifting retail payments in order to fulfill customers’ demands for faster, cheaper and more reliable international payments, and they expect European payment firms to follow accordingly. 

In case they fail, the ECB is to take the matters into its own hands, and proceed into issuing a ‘Digital Euro’ as they label it in an official announcement released. 

Benoit Coeure said that progress on retail payments across Europe has been slow and the market remains fragmented despite the launch of ECB’s TIPS settlement system roughly a year ago. He added that reliance on foreign digital payment providers could expose the Union to financial risks. 

Obviously, this is not the first time we hear of a digital Euro, with the German Bundesbank citing this Summer that they’ve been already working on something analogous for several years, urging other European member countries to consider a European stablecoin instead of Facebook’s Libra or the Chinese DC/EP that was spreading all over the web in a meme-like fashion just a couple of months ago.

“Global stablecoins are the last in a long list of recent initiatives. Their costs and benefits should be investigated thoroughly and in an internationally consistent manner. At the same time, due attention should be given to the shortcomings in existing retail payments, relating to speed, cost, and inclusiveness, which have been highlighted by such initiatives”The ECB signed announcement said.

ECB proposes a pan-European settlements network

In short, ECB blames the private sector for not utilizing the introduction of schemes and infrastructures provided under SEPA, saying that “progress at the back-end has not translated into similar progress at the front-end, which remains fragmented with no European solution emerging for point-of-sale and online payments”.

It is true that even in Europe, the majority of netizens would choose PayPal, GooglePay, ApplePay, and even AliPay over European alternatives that are far from “instant” and charge you similar if not more than a traditional bank. 

Read More: What Can Bitcoin Learn from PayPal?

Previously EU Parliament member Eva Kaili addressed central bank-backed stablecoins in an open letter to ECB’s head Mario Draghi who responded with his views on the matter and said that cryptocurrencies might be volatile, but a state-controlled digital financial system could actually work.

Prior to that, the Germans desperately tried to convince the EU to start working on a digital Euro, stating that if it wouldn’t Germany will make its own version of it, while the Minister of Finance of France, Bruno Le Mair said that Libra and other non-European digital currencies should never be allowed to enter European soil, once again making it clear that not only Europe has not its own version of “Bitcoin” but it is now in danger of adopting a foreign currency as a local standard. 

Nevertheless, ECB’s new proposal suggests that private monetary settlements providers should have to fulfill five key objectives to be considered reliable to trust with the European economy:    

  • Full pan-European reach and a seamless customer experience
  • Convenience and cost-efficiency
  • Safety and security
  • European identity and governance
  • Global acceptance

Furthermore, the paper made clear that candidates must focus on instant payments, and be subject to local and international legislative and regulatory frameworks. 

It is funny how private firms in the US and China are not only shaping the future of the economy, but they are trusted more than blockchain firms to carry the task of creating a national stablecoin to its completion, while in Europe, which is an economic superpower alliance-wise, end-consumers and even enterprises still rely on overseas’ apps and settlement networks.