Executive Board member Fabio Panetta also presented the European Central Bank’s vision for ensuring “efficient, inclusive and secure payments in the Digital Age.”
Panetta described the European Central Board (ECB) vision at the Future of Payments in Europe conference hosted by the Deutsche Bundesbank on Nov 27. At the conference, where German Finance Minister Olaf Scholz called for the quick introduction of a digital Euro, Panetta told attendees that the payments revolution requires Europe to “stand ready to reinvent sovereign money.”
The coronavirus pandemic is accelerating the decrease in the use of cash, Panetta notes. However, digitization of payments in Europe currently rests on non-European international platforms. Reliance on these platforms led, in some segments, to high market concentrations among few players. This exposes Europe to several risks. These could limit choice on the part of consumers, leave the payments infrastructure vulnerable and deprive the authorities of any means of control.
“We must ensure that the payment market remains open to competition, including from European suppliers and technology,” Panetta declared.
Moreover, Panetta said “global tech giants” creating a payments “revolution” threaten the traditional system. Superior information collection by these giants, greater reach, and financial strength give these giants advantages. They also place the system and its users at risk. Unregulated, personal information security and technological robustness can suffer.
Stablecoin and foreign CBDC alarms
Commercial payments endeavours comprise one issue that regulation can solve. Panetta sees stablecoins as another threat manageable in the same manner. In this case, management comes by having an issuer “invest its reserve assets in the form of risk-free deposits at the central bank.”
A far greater problem for the ECB is foreign Central Bank Digital Currency (CBDC). The possibility of Europe’s consumers making a CBDC their primary means of exchange is a threat to European sovereignty.
Even though Panetta claims that CBDC-related risks are not imminent, there are certainly clouds on the horizon. China, for example, is already running a pilot program for its digital yuan and over $300 million has been spent by the beginning of November.
The ECB response
According to Panetta, the European Central Bank and member central banks have begun exploring the implementation of a digital euro. A properly implemented sovereign solution solves many problems with payments and from outside threats. This project proceeds along four directions:
- Testing the interaction between the digital currency and current ECB settlement services
- Examining decentralized technologies and their connection with centralized ones
- Using blockchains with electronic identity
- Utilizing hardware devices to further enable offline transactions
Fabio Panetta pulled no punches in his assessment of the situation and the consequences for the ECB. “What is at stake is nothing short of the future of money,” he said in his closing remarks.
BeInCrypto has reached out to company or individual involved in the story to get an official statement about the recent developments, but it has yet to hear back.