An executive at the European Central Bank is concerned that the digital euro could harm foreign currencies.

Crypto investors are well informed that organizations like as the European Central Bank [ECB] are skeptical of stablecoins and constantly warn of their vulnerabilities.

On December 10, Fabio Panetta, an European Central Bank executive board member, presented a speech that repeated these same talking lines. Panetta did, however, give some fresh and fascinating views on what the digital euro may do to non-EU economies.

Panetta raised concerns after examining the need for a CBDC that a digital euro that could be adopted by non-EU nationals would weaken weaker foreign exchange. He stated,

“Second, the digital euro could spread in third countries to the extent that it would crowd out local currencies, leading to a digital “euro-isation”, which could hamper the transmission of monetary policy and lead to financial instability.”

He later added:

“The risks would be greater for emerging economies that have weak currencies and economic fundamentals, and close trade and financial tie^s with the Single Market and which are integrated into global value chains.^”

As more than a dozen nations establish their own CBDCs or test multiple-CBDC platforms, financial institutions will need to evaluate how foreign residents may opt to utilize these digital currencies. Panetta also expressed concern that the development of the digital euro will undermine the sovereignty of these nations‘ central banks.

During his address, the executive also stated his concern with the amount of foreign companies in the European payments services market. Panetta characterized it as “colonization.”

According to Panetta, only two American facilitators handle over 60% of card payments, while another American firm leads the entire internet payments. Digital payments appear to be costly for many consumers, but they are mostly utilized by persons with medium to high incomes.

That’s where the EU and none other than El Salvador have something in common. According to reports, the European Central Bank believes that a digital euro will help it retain financial stability and lessen its reliance on US middleman. Many countries like El Salvador, meantime, have started adopting Bitcoin to minimize its dependency on the US currency.

Patrick

Coincu News