Latest news with #digitalEuro
Coin Geek
26-06-2025
- Business
- Coin Geek
EU under pressure to update CBDC, tokenization regulation
Getting your Trinity Audio player ready... Despite its landmark Markets in Crypto Assets (MiCA) regulation coming fully into force in January, the European Union is under pressure from the European Central Bank (ECB) and a leading trade body to introduce new regulation so that it does not fall behind its international peers. ECB President Christine Lagarde on Monday urged European lawmakers to speed up the introduction of legislation backing the launch of a digital euro. Meanwhile, a few days earlier, the European Fund and Asset Management Association (EFAMA) published a guide recommending an updated regulatory framework for tokenization. ECB wants digital Euro framework The EU has been exploring the possibility of a digital euro central bank digital currency (CBDC) for several years. The European Commission proposed digital euro legislation in June 2023, and the ECB launched the digital euro 'preparation phase' in November of that year, but progress has been slow since then. In February, the ECB announced it was expanding its initiative to settle transactions between institutions with a wholesale CBDC payment system. The following month, ECB President Lagarde reaffirmed the bank's commitment to the project, saying that the team behind the digital euro was 'focused on accelerating the pace' and highlighting how they are campaigning to get other key stakeholders on board. More recently, on May 5, the ECB announced that it had established an 'innovation platform' to collaborate with European stakeholders on the digital euro project. The project's testing phase is scheduled to end by October, after which the ECB will publish a final report and decide whether to issue a CBDC. However, to do so, it would need the European Parliament to pass legislation, which has not been forthcoming. On Monday, Lagarde renewed her plea to the European Parliament, 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 hearing of the Committee on Economic and Monetary Affairs of the European Parliament on June 23. Legislation on a digital euro has been hampered by indecision and doubt from EU lawmakers. Fresh doubts were raised in February when an outage in the ECB's pan-European TARGET 2 Securities (T2S) platform, which is used to complete trades in cash and securities across the 24 countries that share the euro, along with the central banks and the ECB itself, reported a glitch in its communication channels. In the end, the outage was fixed fairly swiftly, lasting only 10 hours, but the short-term chaos it caused was enough to raise questions about the central bank's ability to deliver a digital euro project. To win back support for the project and add a sense of regulatory urgency to the mix, Lagarde pointed to the risks posed by the growing stablecoin market, particularly in the United States. 'Stablecoins are privately issued and notably pose risks for monetary policy and financial stability,' said Lagarde. 'These assets are not always able to maintain their fixed value, compromising their usefulness as a means of payment and a store of value.' Lagarde also noted that most major jurisdictions, including the United States, still do not have regulatory frameworks in place for stablecoins, and the issuer of the largest stablecoin, Tether, was based in El Salvador, 'which lacks any prudential framework' for this product. Further, she suggested that a potential shift in deposits used for payments and savings—from banks to stablecoins—could adversely affect monetary policy transmission through banks. While praising the MiCA regulation for its 'sound rules' related to stablecoins, 'minimizing the risks for consumers and financial stability,' Lagarde insisted that, in the context of the growing stablecoin market and the influence of the U.S., 'accelerating progress towards a digital euro is a strategic priority.' She argued that, beyond addressing some of the risks posed by stablecoins, 'a digital euro would help safeguard Europe's bank-based financial and monetary system. Not only would it strengthen Europe's strategic autonomy, but it would also ensure an innovative and resilient European retail payments system.' To conclude her pitch for the digital euro, Lagarde quoted the French writer Émile Souvestre, who observed, 'there is something more powerful than strength, than courage, than genius itself: it is the idea whose time has come.' However, the ECB president wasn't the only one turning up the heat on the legislative efforts of EU lawmakers this week. EFAMA calls for tokenization legislation and changes to DLT Pilot regime On June 20, EFAMA, a trade association representing the fund management and asset management industry in Europe, published a report praising the progress made in the tokenization space in Europe but voicing 'concerns that Europe's early lead could be squandered if regulation does not keep pace with market developments.' The 'Buy-side Practitioner's Guide to Tokenization' included an overview of how tokenization is shaking up the asset management industry, the global context as other jurisdictions move to enable digitalization and a 'how-to' for fund managers starting in tokenization. 'A number of European jurisdictions have emerged as hubs for DLT assets, powered by national legal frameworks on custody and transfer of digital securities, as well as the broader European framework on non-traditional crypto-assets (MiCA) and trading and settlement (DLT Pilot Regime),' said EFAMA. 'The level of activity among firms shows how important a digital strategy is for adapting to the future tokenized economy.' According to data from Horizon Grand View Research, the European tokenization market generated revenue of $821.4 million in 2024 and is expected to grow at a compound annual growth rate (CAGR) of 20.9% from 2025 to 2030. To support this booming market, EFAMA recommended increased regulatory convergence between divergent national rules on digital assets across the bloc's 27 member states, saying that 'stronger convergence would prevent regulatory arbitrage and help promote scale in DLT-based investment funds.' This convergence would include the regulatory frameworks for traditional assets, such as MiFID II, and those for digital assets, namely the DLT Pilot Regime and MiCA. 'As DeFi grows, there should be no distinction between the traditional ecosystem and the DLT-based ecosystem, but rather a single, integrated financial ecosystem,' said EFAMA. Another change it argued for was regulatory clarification to support the uptake of tokenized money market funds (t-MMFs)—regular money market funds that are turned into digital tokens on a blockchain—as collateral in derivatives margining and repurchase transactions. 'Every effort should be made by regulators, central banks, and the industry to ensure that t-MMFs are utilized to their full potential,' argued the trade association. 'The EU will need to prioritize streamlined policies and practical initiatives—beyond what MiCA's and DLT Pilot's are delivering—to foster tokenized asset growth in Europe.' In this regard, EFAMA also proposed a clear level playing field for cash-on-chain solutions and fostering a competitive landscape that includes a digital euro, MiCA-regulated stablecoins, and commercial bank money tokens. This, it argued, would be 'the optimal outcome signaling that Europe is open to innovation and market-led forces.' The alternative, warned the trade body, would be failing to keep pace with developments in other jurisdictions and, in doing so, ceding the early advantage that the EU acquired with the DLT Pilot and the landmark MiCA regulation, at a crucial time 'where scale is everything.' This was emphasized by Peter Kerstens, advisor to the European Commission, who said in the report that 'in the race to establish dominance in DLT, we don't want Europe to become a flyover zone between the U.S., the Middle East, and Asia.' On the subject of the EU's DLT pilot regime, EFAMA's most pressing proposal was an 'immediate increase' to threshold limits imposed to 'increase available liquidity on DLT platforms and enhance trading volumes in the secondary market.' DLT Pilot limits The DLT Pilot Regime was initiated in March 2023 to create a market infrastructure for trading financial instruments based on distributed ledger technology (DLT). It provided the legal framework for trading and settlement of transactions in digital assets that qualify as financial instruments under MiFID II, while facilitating the set-up of new types of market infrastructures, including DLT multilateral trading facility, DLT settlement system, and DLT trading and settlement system. The DLT Pilot currently only applies to shares and units in collective investment undertakings of less than €500 million ($580.9 million) and debt securities with an issue size of less than €1 billion ($1.16 billion). It also imposes a DLT market infrastructure limit of €6 billion ($6.9 billion). Where this is exceeded, the operators of the DLT market infrastructure would be required to activate a special transition strategy to reduce the trading activity on their platform. In its guide, EFAMA argued that the DLT Pilot Regime should be amended to increase thresholds on eligible instruments. 'This will have an immediate positive effect on i) market interest in providing DLT-based trading and settlement platforms and ii) available liquidity on such platforms and enhanced trading volumes in the secondary market,' said the trade body. However, the guide did not specify what the new limits should be. Watch: Finding ways to use CBDC outside of digital currencie title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" referrerpolicy="strict-origin-when-cross-origin" allowfullscreen="">
Yahoo
23-06-2025
- Business
- Yahoo
ECB's Panetta says no reason to fear banks' liquidity drain from digital euro
MILAN (Reuters) -The digital euro will be designed in a way that poses no threat to the overall liquidity held by the banking system, top European Central Bank policymaker Fabio Panetta said, adding that the ECB could anyway counter any hit to liquidity. Speaking to students at the annual Young Factor conference in Milan, Panetta said a digital euro was a necessity because the digitalisation of the economy risked marginalising the role of central bank money, leading to a riskier and more unstable economic environment. Under the digital euro project, euro zone residents would be able to transfer part of the money in their bank accounts into digital euro accounts with the ECB. To avoid depriving commercial banks of an excessive amount of deposits, the project envisages capping individual savers' digital euro holdings. Panetta said such limits would be set in a "conservative" way, calculating what would be the impact on the aggregate level of liquidity of the maximum amount of cash each saver could shift into digital euros to make sure there is no impact on the economy. "Anyway, be aware that even if the digital euro drained liquidity away from banks and turned bank deposits into central bank liabilities, the level of liquidity in the system is a decision of the European Central Bank. The ECB can offset any reduction in liquidity," Panetta said. "It's like real liquidity. Like water in a tank. Whatever amount spills out, we can refill it. The digital euro is being built in a way that ... limits outflows from bank deposits. On top of that, the ECB could always offset any impact." Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
Zawya
23-06-2025
- Business
- Zawya
ECB's Lagarde urges EU lawmakers to speed up digital euro law
European Central Bank President Christine Lagarde on Monday urged European lawmakers to speed up the introduction of legislation backing the launch of a digital euro. The ECB has been working for years on a digital version of the single currency, essentially an online wallet, but it needs the European Parliament to pass legislation -- a step that has proven elusive amid resistance from lawmakers. 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)
Reuters
23-06-2025
- Business
- Reuters
ECB's Lagarde urges EU lawmakers to speed up digital euro law
FRANKFURT, June 23 (Reuters) - European Central Bank President Christine Lagarde on Monday urged European lawmakers to speed up the introduction of legislation backing the launch of a digital euro. The ECB has been working for years on a digital version of the single currency, essentially an online wallet, but it needs the European Parliament to pass legislation -- a step that has proven elusive amid resistance from lawmakers. 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)
Reuters
18-06-2025
- Business
- Reuters
ECB's Panetta says no reason to fear banks' liquidity drain from digital euro
MILAN, June 18 (Reuters) - The digital euro will be designed in a way that poses no threat to the overall liquidity held by the banking system, top European Central Bank policymaker Fabio Panetta said, adding that the ECB could anyway counter any hit to liquidity. Speaking to students at the annual Young Factor conference in Milan, Panetta said a digital euro was a necessity because the digitalisation of the economy risked marginalising the role of central bank money, leading to a riskier and more unstable economic environment. Under the digital euro project, euro zone residents would be able to transfer part of the money in their bank accounts into digital euro accounts with the ECB. To avoid depriving commercial banks of an excessive amount of deposits, the project envisages capping individual savers' digital euro holdings. Panetta said such limits would be set in a "conservative" way, calculating what would be the impact on the aggregate level of liquidity of the maximum amount of cash each saver could shift into digital euros to make sure there is no impact on the economy. "Anyway, be aware that even if the digital euro drained liquidity away from banks and turned bank deposits into central bank liabilities, the level of liquidity in the system is a decision of the European Central Bank. The ECB can offset any reduction in liquidity," Panetta said. "It's like real liquidity. Like water in a tank. Whatever amount spills out, we can refill it. The digital euro is being built in a way that ... limits outflows from bank deposits. On top of that, the ECB could always offset any impact."
