ECB's Lagarde urges EU lawmakers to speed up digital euro law
Lagarde renewed her plea in the European Parliament on Monday, describing the digital euro as key to Europe's financial autonomy and taking aim at competing, privately issued digital currencies known as stablecoins.
"A legislative framework to pave the way for the potential introduction of a digital euro should be put in place rapidly, please," Lagarde told a committee of the European Parliament. The European Commission proposed digital euro legislation in June 2023, but not much has happened since. If the European Parliament passes the necessary law, the ECB's Governing Council hopes to vote on launching a digital euro in the autumn. Representatives from four of the eight political groupings that make up the European Parliament have said an outage in the ECB's existing payment system earlier this year raised some questions about the central bank's ability to deliver a digital euro project.
In the ECB's design, digital euros would be available to all euro area residents, probably up to a threshold in the 3,000 euro ($3,440.40) region.
They would be guaranteed by the central bank but made available by banks and wallet operators.
European bankers have mostly been sceptical, fearing that it would empty their coffers as customers transfer some of their cash to the safety of an ECB-guaranteed wallet.
A study by accounting firm PwC on behalf of some bank industry bodies estimated the digital euro may cost the banking sector between 18 billion euros and 30 billion euros in technical, commercial and operational expenses. The ECB has pitched the digital euro as a response to U.S. President Donald Trump's push to promote stablecoins, a type of cryptocurrency typically pegged to the U.S. dollar.
Lagarde said stablecoins posed "risks for monetary policy and financial stability" because they could lure deposits away from banks and don't always maintain their fixed value. Stablecoin TerraUSD collapsed in May 2022 when it was unable to maintain its peg to the dollar. Its collapse and that of its sister token Luna caused a market crash that triggered a wave of bankruptcies in the crypto industry.
Lagarde also noted there was no global regulation for this corner of the market and the issuer of the largest stablecoin, Tether, was based in El Salvador, "which lacks any prudential framework" for this product.
"This fragmented approach prevents a global level playing field and can open the door to new risks and systemic vulnerabilities," Lagarde said. "We must therefore remain alert to developments in other jurisdictions and advocate for globally aligned regulations for stablecoins."
($1 = 0.8720 euros)
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