ECB Sets Out Vision for Digital Euro and Future of Money
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The European Central Bank recently shared a speech by Piero Cipollone, a Member of the Executive Board of the ECB, to a roundtable at Aspen Institute Italia.
Published on Friday, December 19, the speech focuses on the future of money and the bank’s vision for the digital euro.
The Role Of Central Banks In The Financial Industry
Cipollone started the speech by saying that money is at the heart of what central banks do, as their core role has always been to issue money and protect its value. He stressed that this will not change, but the technological environment in which central banks deliver it is changing, and the changes are quite radical.
He pointed out that digital changes have become the norm, and new technologies are disrupting financial services. Financial institutions have changed as well, becoming technological entities, while tech firms are massively entering the spheres of payment and finance.
“Central banks are no exception. If they want money to remain stable, trusted and usable in a digital world, they must help shape that world and modernise central bank money. If they fail to do so, central banks may no longer be able to provide an anchor of stability to the financial system,” Cipollone warned.
He said that in the euro area context, there are good reasons for central banks to not just follow, but take the lead in the transformation of money.
“As a monetary union, we share a single currency and a single monetary policy. For that to work, we must ensure the singleness of money across the euro area: one euro must always be worth one euro, no matter its form and no matter where in the euro area.”
A Three-Fold Strategy To Take European Banking Into The Future
He pointed out that the Eurosystem – meaning the ECB and the national central banks of countries that use the euro – has played a key role in this respect, issuing banknotes, building robust infrastructures, and creating systems for instant payments, collateral, and more, all of which allowed money and assets to move safely and efficiently across the euro area.
However, now is the time to take the next steps, and adopt a new, three-fold strategy, which would focus on getting ready for the potential issuance of a digital equivalent of cash – the digital euro. This would be the first part of the strategy, followed by enabling transaction settlements based on distributed ledger technology in central bank money, which will be the focus in 2026.
Finally, the third and final part of the strategy will be interlinking the fast payment system with those of other countries to enhance cross-border payments.
He also noted that there are challenges, such as fragmented retail payments in Europe, the changing nature of money and payments, and the slow, costly, and opaque cross-border payments, noting that this can be resolved through the use of stablecoins. However, even stablecoins come with their own risks, especially for domestic currencies and financial systems.
Ultimately, he concluded that doing nothing is not a sound option. “If central bank money were to become marginal in a digital world, we would risk having a less resilient payment system, a less stable financial system, weaker monetary sovereignty and reduced strategic autonomy. European financial institutions and infrastructures would be at a competitive disadvantage, and the euro’s role could diminish,” he said.
