Is sovereignty the driving force behind the digital euro agenda? – General ledger information

Last Friday, Fabio Panetta, member of the board of directors of the European Central Bank (ECB), spoke about the digital euro during a speech in Rome, mentioning sovereignty as the first benefit of the launch of a digital currency of the central bank (CBDC).

It has been repeatedly pointed out that two-thirds of European card payments are made through Visa and Mastercard in the United States, and there is also PayPal in digital payments. Card payments are the main reason 20 banks have created the European Payments Initiative.

“The ‘colonization’ of the European payment system is not an imminent danger,” said Panetta. But he pointed to the increase in stablecoins to over $ 120 billion combined with Big Tech’s expansion in finance. The response to both trends should be approached beyond mere supervision and regulation, but with a CBDC.

Panetta also spoke of sovereignty in terms of the euro’s international role, arguing that it could increase the euro’s suitability as a global invoicing currency, “reduce the dollar’s global dominance and reduce global dependence on the dollar. -to a single source of liquidity ”.

It could be argued that the emphasis on sovereignty was due to the fact that it was a speech and therefore needed to emphasize fewer points. But that was an in-depth discussion, and compared to last year’s Digital Euro report, sovereignty seemed to matter a lot more.

In March, Mediobanca released a report on the digital euro that also put monetary sovereignty at the forefront. The Italian bank argued that while the United States and Europe are historical partners, the bonds have been weakened. China is now Europe’s largest trading partner, and US sanctions and tariffs combined with troop withdrawals have reduced US ties with Europe.

Mediobanca argued that a digital currency is particularly important in Europe for political reasons. It would be:

  1. “Arm the ECB to defend the monetary sovereignty of foreign countries DC (digital currency),
  2. support the objective of the Commission (EC) of fostering the strategic independence and international role of the euro by breaking away from US surveillance / sanctions, regaining control of payments and strengthening ties with partner countries ,
  3. add push to inertia for further integration in Europe.

They might be right.

In the context of Panetta’s presentation, before discussing the digital euro, he referred to the need for a CBDC more generally, saying it is essential as an anchor for private money. In other words, the ability to convert to central bank money such as cash ensures the stability of private money. And as the world becomes more and more digital and money shrinks, a digital alternative is needed. Central bankers begin to sing the hymn sheet. This is the same main argument made by the Deputy Governor of the Bank of England, Sir Jon Cunliffe, during a recent House of Lords committee on the CBDC.

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