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European Central Bank (ECB) board member Piero Cipollone has called for the rapid implementation of a digital euro following U.S. President Donald Trump’s executive order promoting dollar-backed stablecoins globally. Cipollone highlighted concerns over stablecoins’ potential to disrupt traditional banking systems, emphasizing the urgency for Europe to stay competitive in the digital financial landscape.
Trump’s Executive Order and Global Stablecoin Growth
On January 23, 2025, President Trump signed an executive order to support the development and global expansion of “legitimate dollar-backed stablecoins.” The directive seeks to strengthen U.S. leadership in digital financial technology and prohibits federal agencies from pursuing central bank digital currencies (CBDCs).
Cipollone, speaking at a conference in Frankfurt, expressed concerns about the executive order:
- Threat to Banks: Stablecoins disintermediate traditional banks, reducing their fees and customer base.
- Global Reach: Cipollone stressed the term “worldwide,” warning that the U.S. push for stablecoins could weaken European financial institutions.
The Case for a Digital Euro
The ECB is actively exploring a digital euro to counter the growing influence of dollar-backed stablecoins.
The introduction of a digital euro would make payments easier for everyone by providing an additional secure payment option accepted throughout the euro area. Like cash, everyone could pay with a digital euro free of charge, including for online payments, without necessarily needing a bank account or a payment card.
The digital euro, however is not a decentralised blockchain, According to the Human Rights Foundation, CBDCs risk imposing sweeping financial surveillance, restriction of financial activity, frozen funds, seizure of funds, negative interest rates, tools for corruption, cyberattack risks and disruptions to financial stability.
- Prototype Development: The ECB plans to start creating a digital euro prototype in 2025, with a final decision on its launch expected by October.
- Mitigating Risks: To address banks’ concerns over losing deposits, the ECB has proposed capping digital euro holdings and making them non-interest-bearing.
- Legislative Support: The rollout depends on enabling legislation from European lawmakers, highlighting the need for political alignment.
Stablecoins’ Rapid Growth
Stablecoins, digital tokens backed by real-world assets like the U.S. dollar, continue to grow in market significance:
- Market Data:
- Total stablecoin market cap: $211 billion (as of January 2025).
- Monthly transaction volume: Over $6 trillion.
- Global Landscape:
- Countries like Nigeria, Jamaica, and the Bahamas have launched digital currencies.
- Nations such as China, Russia, and Brazil are running CBDC pilot programs.
Diverging Paths: U.S. vs. Europe
While the U.S. is betting on private stablecoins to dominate the digital financial space, the ECB is focusing on a public digital euro to maintain monetary sovereignty and stability.
- Trump’s Vision:
- Prohibit a U.S. CBDC.
- Promote stablecoins globally.
- Exclude Federal Reserve and FDIC officials from crypto-related discussions, following allegations of crypto debanking under the Biden administration.
- Europe’s Response:
- Accelerate digital euro development.
- Ensure competitiveness of the Eurozone’s financial system against U.S.-led stablecoin expansion.
What at stake ?
The ECB’s push for a digital euro reflects its commitment to safeguarding Europe’s financial system amid a shifting global landscape. Trump’s executive order has further amplified the urgency for Europe to develop its own digital currency to compete with the growing dominance of U.S. dollar-backed stablecoins.
