TLDR European policymakers are intensifying efforts to introduce a digital euro to reduce reliance on U.S. payment systems. The European Central Bank sees paymentTLDR European policymakers are intensifying efforts to introduce a digital euro to reduce reliance on U.S. payment systems. The European Central Bank sees payment

Europe Pushes for Digital Euro to Reduce Dependence on U.S. Payment Firms

TLDR

  • European policymakers are intensifying efforts to introduce a digital euro to reduce reliance on U.S. payment systems.
  • The European Central Bank sees payment systems as critical infrastructure and aims to protect Europe’s economy from external risks.
  • ECB officials stress the digital euro will provide a secure and reliable alternative to privately issued digital currencies.
  • The digital euro project is progressing, with a pilot phase scheduled for 2027 and full issuance possibly by 2029.
  • Political challenges remain as the European Parliament has yet to finalize its stance on the digital euro initiative.

European policymakers are intensifying efforts to develop a digital euro to reduce the region’s reliance on U.S.-based payment providers. This initiative follows growing concerns about Europe’s dependence on foreign financial infrastructure amid rising geopolitical and trade tensions. Senior officials at the European Central Bank (ECB) have expressed the need for a public, digital form of currency to ensure economic security and sovereignty.

Payment System Dependency on Foreign Networks

Europe’s retail payment systems have been largely dominated by international players such as Visa, Mastercard, and PayPal. This dominance has raised alarms among policymakers, as external risks increase with heightened global trade and political tensions. “Payments are not just a technological issue but a strategic one,” said Piero Cipollone, ECB Executive Board member. He emphasized that Europe’s heavy reliance on foreign networks presents a long-term vulnerability to the economy.

The issue is particularly urgent as geopolitical instability grows, making Europe more susceptible to external disruptions. Cipollone warned that without a change in direction, Europe will continue to face these risks. He further explained that the European Central Bank views payment systems as critical infrastructure that must be protected for the smooth functioning of the economy.

Digital Euro Progressing Steadily

The digital euro project, launched by the European Central Bank in 2021, is advancing, with plans for a pilot phase beginning in 2027. Full issuance of the digital currency could occur by 2029, contingent on the completion of necessary legal and political processes. The goal is to offer a secure, reliable alternative to privately issued digital money while maintaining monetary sovereignty within Europe.

While the primary focus remains on enhancing Europe’s internal payment ecosystem, Cipollone also noted that the digital euro could be extended globally once the infrastructure is in place. This would help strengthen the euro’s role in international markets, although this is not the primary objective of the initiative. The ECB believes a balanced system that combines public money and private innovation will best serve the needs of the region.

Despite the ECB’s progress, the digital euro faces significant political hurdles within Europe. In 2023, the European Commission proposed a legal framework for the digital euro, and EU member states agreed on a common position. However, the European Parliament has yet to finalize its stance on the project, with some lawmakers arguing that private-sector solutions could achieve the same goals without the need for a new form of central bank money.

The ECB also addressed the rise of stablecoins, which have gained political backing in the U.S. and are seen by some as an alternative to traditional currencies. ECB officials are concerned that widespread stablecoin adoption could undermine Europe’s financial stability. As a result, they argue that Europeans need a simple, secure public alternative to digital money, which the digital euro aims to provide.

The post Europe Pushes for Digital Euro to Reduce Dependence on U.S. Payment Firms appeared first on CoinCentral.

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