The U.S.’s rejection of a central bank-designed digital currency has lent even more importance to the project in Europe, Bank of France Governor François Villeroy de Galhau said on Wednesday.
Addressing a conference in Frankfurt, Villeroy warned of the risk of losing a public anchor for money, something that the ECB’s own project for a “digital euro” guarantees by being simply a digital version of cash.
In the U.S., President Donald Trump issued an executive order a day after his inauguration banning the Federal Reserve from developing a digital dollar, choosing instead to allow the private sector free rein in developing new payment technologies. Crucially for the ECB, that includes digital currencies pegged to the dollar that can circulate in the eurozone, eroding its control of the financial system.
“The question is if the issuer these digital currencies are only private and not public, are not European rather than European,” Villeroy said.
Such questions, he said, “are now much more relevant than before the executive order of January 21,” he said.
Last week, ECB President Christine Lagarde urged EU leaders and lawmakers to decide quickly on whether to support the Bank’s controversial plans for the digital euro. The ECB says its plans would provide a means for Europeans to transact seamlessly across borders and argues such a platform would defend a fragmented payment sector from U.S. tech monopolies. Many smaller banks fret it would leave them more vulnerable to ‘runs’ on their traditional deposit bases.
Since Trump’s election last November, the ECB has increasingly highlighted the urgency of the project, and hopes to launch its development phase by October. However, that is still being held up by a fraught legislative process in Brussels marked by fierce disagreement among member states, parliamentarians and the European Commission.
