The European Central Bank sought on Thursday to allay misgivings in Germany about the launch of a digital euro, saying this form of electronic cash wouldn’t be used to penalise savers or upend banks.
The ECB is exploring the launch, within the next five years, of a digital version of the euro to stem competition from cryptocurrencies like Bitcoin and stablecoins such as Facebook’s proposed Diem, which are backed by official currencies.
But it has run into opposition in Germany, where the ECB’s main shareholder, the Bundesbank, has been lukewarm about the project and popular magazine Focus wrote that a digital euro would be “catastrophic for savers”.
In an op-ed in the conservative Frankfurter Allgemeine Zeitung, ECB board member Fabio Panetta and official Ulrich Bindseil said the digital euro would not replace physical cash.
“The ECB is by no means planning to use a digital euro to enforce interest rates that are significantly more negative,” Panetta and Bindseil said in the article. “As long as there is cash, it will always be able to be held at an interest rate of zero percent.”
In an interview with FOCUS, economist Richard Werner had said the ECB had put banks “on their knees” with low rates and now wanted to take the vital deposit-taking business away from them.
And Bundesbank officials have often stressed a digital euro could pose risks to banks and should be studied at length before any decision is made.
But the two ECB officials said the digital euro could be designed so that it doesn’t compete with bank deposits - a reference to previously outlined plans for capping the amount that each citizen can hold or penalise balances over a certain threshold.
They added a digital euro would ensure the euro zone’s independence from foreign companies and powers.
“We have to prevent European payment transactions from being dominated by providers outside Europe, such as global technology giants who will offer art currencies in the future,” the two officials wrote.
“By preparing for a digital euro, we are also securing the autonomy of Europe. It is a safeguard in the event that undesirable scenarios occur,” they added.
The ECB recently told European Union lawmakers it wants veto power on the launch of stablecoins in the euro zone and a greater role in their supervision.
Facebook was originally planning to launch a stablecoin backed by a basket of official currencies including the euro, but it now aims for a token backed only by the U.S. dollar.
Reporting By Francesco Canepa, Editing by William Maclean