Last week one of the clauses in President Trump’s executive order relating to digital assets was for “promoting and protecting the sovereignty of the United States dollar, including through actions to promote the development and growth of lawful and legitimate dollar-backed stablecoins worldwide.”
In an event last week, European Central Bank (ECB) director Piero Cipollone responded. “I guess the key word here is ‘worldwide’,” Cipollone told a conference in Frankfurt, according to Reuters. “This solution, you all know, further disintermediates banks as they lose fees, they lose clients…That’s why we need a digital euro.”
We weren’t at the conference, so we don’t know what Mr Cipollone said before highlighting the need for the digital euro. A central bank digital currency (CBDC) is not a cure for bank disintermediation, even if the digital euro is distributed via banks. A CBDC accelerates disintermediation. The banking federations have been arguing for a more constrained roll out of the digital euro, precisely to prevent the flight of deposits to the CBDC.
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