I’ll explain who fears the digital euro
Goals, potential and challenges of the digital euro. Stefano Feltri's point for the Appunti blog
For Fabio Panetta appointed governor of the Bank of Italy, returning to Italy in the autumn will also mean abandoning the great project he has been working on in recent years, that of the digital euro which the European Commission is now preparing to regulate.
Explaining what it is and what it is for is a complex mission, given that we all already have the sensation of making digital payments in euros and do not feel the need for other supports.
In a nutshell, however, the payments we make now are based on complex interactions between private banks and international payment systems which – we discovered in the conflict with Russia – can be fragile and even an instrument of economic warfare.
Today it was Russia's turn to suffer exclusion from the Swift payment system and the freezing of reserves in other central banks, but tomorrow it could happen to others.
In a financial globalization that is reorganized around the principle of strategic autonomy, a digital euro managed by the ECB would guarantee Europe its structural independence also from the United States and their financial offshoots.
Furthermore, the ECB wants to prevent other countries – such as China – or private entities with little supervision and very risky in the world of cryptocurrencies from intercepting the new demand for digital payments.
Of course, it could also have two contraindications: allowing a very powerful and relatively little controlled institution like the ECB to monitor all transactions of individuals (there are a thousand reassurances that this will not happen, but also some fears that it will remain possible) and could make obsolete the entire banking system.
With a truly successful digital euro, it would be less necessary to deposit one's money in the bank, pay expensive commissions to access our savings and use them through credit cards or other payment instruments.
If even normal people, such as banks, had an account directly with the ECB, which cannot fail, they would pay much less and would have much more security.
But in this way the banks would lose the collection of savings which they then use to disburse mortgages and loans to companies. This is why there is discussion of limits on the number of digital euros that people could hold, to force them to use bank deposits anyway (but when it becomes clear that the current account only serves to guarantee the bank's profits, how many will really want to continue using it if are there alternatives available?).
Furthermore, and the ECB never underlines this, direct control of the digital euro would make it possible, if necessary, to apply negative rates directly to deposits, to encourage people to spend and support the economy and prices (in case it arises again the problem of deflation, once the current inflation ends).
Perhaps Panetta, all in all, won't mind dealing with more domestic matters instead of this bold bet on the future of the financial system.
(Excerpt from the blog Notes )
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/vi-spiego-chi-teme-leuro-digitale/ on Sun, 02 Jul 2023 05:46:20 +0000.