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During the latest digital euro hearing, European Central Bank (ECB) official Piero Cipollone answered questions on whether the regulator is best placed to take on the challenge of issuing a digital euro, while emphasising the need for strategic autonomy.
The digital euro is a topic that has never quite secured endorsement from MEPs, left or right, and has at times seen testy exchanges between politicians and the ECB.
However, with a new intake of MEPs after the election in June, and one of the digital euro’s most adamant critics, Michiel Hoogeveen, having not been re-elected, the exchange between the two institutions at the meeting of the European Parliament’s Economic and Monetary Affairs (ECON) committee on Monday (September 23) was more conciliatory.
During the hearing, Cipollone, a member of the ECB’s executive board, confirmed that the bank hopes to pilot the digital euro in mid-2027, while dodging answers on topics such as whether consumers will be able to hold more than one wallet.
Stefan Berger, the German MEP who is rapporteur for the digital euro legislation, commented that the European Parliament enjoys a “good dialogue” with Cipollone.
Howver, Berger also signalled to the official that work is happening to enhance autonomy beyond the digital euro, noting that “some European banks have woken up and tried to create their own payment system”.
Private initiatives
Gilles Boyer, a French politician, asked Cipollone a similar question: “How do you think that the digital euro can work with the European Payment Initiative, which aims to come up with a payment system that will be inter-European and aims to compete against Visa and Mastercard?”
“How are we going to avoid a rivalry between those two?” he added.
Boyer was positive about the digital euro, saying that it was important to “counter the use of private currencies”.
He also said that “we want state currencies protected and we want to protect the strategic autonomy of Europe, and we don’t want to depend on the use of foreign digital currencies. This is why we’ve embraced this so enthusiastically.”
In response, Cipollone said he was “very supportive” of any private initiative that supports a pan-EU system, saying that he sees private sector involvement as “essential” and that he wants to find a “synergy”.
“We are not competing with private initiatives,” he added. “We are providing for them an additional card to add to their deck to play on this competition gap with non-European players.”
He added that banks and schemes will not lose money whether consumers pay with a digital euro or with commercial bank money.
This is because the compensation model is such that the fee that the bank or the scheme would get is the same, regardless of whether the customer uses a digital euro or commercial bank money.
Cipollone also said that if private solutions want to go beyond jurisdictions they are working in, they need to invest heavily in acceptance infrastructure, but that the digital euro will provide this infrastructure.
Nevertheless, some MEPs continued to ask questions on the issue of private involvement.
For example, Spain’s Fernando Navarrete Rojas said: “Don’t you think we can get better results with less money in terms of increased European sovereignty and increased competition in retail markets just by auctioning this €1bn to the private sector?”
He suggested the private sector might offer much better returns than the public sector, and argued that the “rest of the world” is moving away from the idea of central bank digital currencies (CBDC) that focus on the retail sector, instead looking at wholesale solutions.
“All the world, except China — and for the wrong reasons — have decided to skip that project and go to the wholesale CBDC, which is more promising and can do much more,” he said.
In response, Cipollone said that the ECB has been trying to provide the infrastructure to ensure that the eurozone can come together on pan-EU means of payments.
Noting the private sector’s slow progress on enhancing instant payments, he said “still there is little action going on”, emphasising the need for regulation, which is now coming with the Instant Payments Regulation.
He added that private players have not made the “optimal investment decision” and that the ECB does not think that auctioning the project off to the private sector is the right way.
He also noted that jurisdictions such as Brazil and the UK are moving in a similar direction to the EU on retail CBDCs.
Strategic autonomy
Considering the geopolitical situation and how the economic dial has shifted away from globalisation to a more nationalist focus, it is unsurprising that Cipollone spoke so much on the need for autonomy.
Payments is undeniably an area where Europe has little strategic autonomy — most consumers willingly pay with international card schemes, unaware of how much this frustrates the policymakers of Brussels and Frankfurt as they bid to rein in the EU’s dependency on the US.
"Imagine attending the World Cup in Spain in 2030 and being unable to buy a drink with anything other than Alipay," the ECB official said during his opening speech to the ECON committee.
This dependency was already evident during the European Football Championships, where tickets could only be purchased using American or Chinese payment methods, he pointed out, arguing that such a scenario would be unthinkable in the US.
Cipollone also said that in addition to making Europe overly dependent on non-European payment systems, the shift to digital payments also poses a risk to elderly and less tech-savvy populations.
"What happens if digital payments suddenly stop working? Just two weeks ago, significant parts of the European card payments market were shut down for almost an entire day,” he said, drawing a comparison to the energy crisis Europe faced after Russia’s invasion of Ukraine, and stressing that Europe must do better for its citizens.
“A digital euro would strengthen Europe’s financial sovereignty and resilience,” Cipollone said, noting that it would be built on European technology and infrastructure, giving the region greater control over its financial future.
Although MEPs were less cold towards the idea of the digital euro than they had been in previous parliamentary hearings, there is still much to be ironed out and aligned between Frankfurt and Brussels.
Payment service providers will be watching closely as they continue to weigh up whether the digital euro will be a positive opportunity for them or whether it is a case of the state undermining their revenue streams.
