Big Banks Challenge ECB’s Digital Euro Over Cash Flight Fears

The European Central Bank’s effort to build a homegrown payments system using a digital euro is being slowed by European banks’ concerns that the solution would lead to customers transferring cash from banks to an ECB wallet, Reuters reported Thursday (May 21).

These concerns have held up European Parliament legislation to issue a digital currency for three years, according to the report.

Banks are also exploring alternatives to a digital euro, such as a euro-pegged cryptocurrency. On Wednesday (May 20), an additional 25 banks joined a consortium that is developing such a solution, per the report.

PYMNTS reported in December that this venture, Qivalis, was formed by 10 of Europe’s biggest banks and aims to launch a euro-pegged stablecoin to provide convenience and “monetary autonomy in the digital age.”

These efforts come at a time when the shift to cashless payments has increased the euro zone’s reliance on payments firms in the United States, leading to concerns that the region could grow too dependent on these firms and that the role of the euro could be challenged by new forms of money. Currently, U.S. firms such as Visa and Mastercard handle nearly two-thirds of card payments in the euro zone, and PayPal and Apple are gaining share as well, the report said.

The European Union lawmaker who is overseeing digital euro legislation in the European Parliament, Fernando Navarrete, said the details of a digital euro are being discussed and that he expects a final vote on the legislation this summer, according to the report.

“Europe is moving toward payment sovereignty by developing both private interoperable payment solutions and the digital euro,” Navarrete said, per the report. “The real challenge is to make the development of both options compatible and efficient without imposing additional costs on citizens.”

The ECB said in April that it signed agreements with three European standard setters to facilitate digital euro payments, if the digital euro regulation gets adopted by EU co-legislators.

The agreements with the European Card Payment Cooperation (ECPC), nexo standards and the Berlin Group allow the reuse of their existing open technical standards for processing digital euro online payments.