Key Takeaways
- EU lawmakers remain skeptical of the digital euro, raising concerns about privacy and inclusion in everyday payments.
- ECB Executive Board member Piero Cipollone defended the project, calling the digital euro a necessary complement to cash that could ensure payment continuity during crises, such as cyberattacks or infrastructure failures.
- President Christine Lagarde warned stablecoins are reintroducing systemic risks, including liquidity pressure and redemption instability, especially in cross-border setups involving non-EU issuers.
- Both stablecoins and the digital euro face similar vulnerabilities, prompting calls for solutions like zero-knowledge KYC, offline access, and activity-based regulatory oversight.
The European Central Bank’s plan to introduce a digital euro faced skepticism in the European Parliament on Thursday, with lawmakers raising fresh concerns about privacy and digital exclusion, while also emphasizing the need for a public alternative to private payment systems.
While speaking before the Economic and Monetary Affairs Committee, ECB Executive Board member Piero Cipollone said the digital euro would strengthen Europe’s payment resilience and ensure access for all citizens, even during disruptions. But despite that assurance, some lawmakers remain unconvinced.
Several members of the committee questioned the real-world demand for a digital euro and raised concerns about how it might impact privacy and digital inclusion.
Meanwhile, others raised concerns about privacy and centralized control, warning that the digital euro could give public authorities too much influence over payment systems and reduce user autonomy.
In response, Cipollone acknowledged the concerns but defended the proposal, arguing that the digital euro is not intended to replace cash but to complement it and ensure continuity of payments in times of crisis. “Legal tender must always be accessible to everyone in our monetary area.”
He pointed also to recent disruptions, including cyberattacks and power outages across several EU countries, as evidence of the need for a public fallback. “What would happen if we weren’t in a position to ensure payment continuity?” he asked. “We would be blamed for not having acted when we could.”
The ECB said that the digital euro would also reduce dependence on non-EU payment providers and improve access to basic services, even during outages. Cipollone described it as “a public good,” and said the project is being designed with accessibility in mind.
Stablecoin Risks Rekindle Broader Concerns
This renewed skepticism toward the digital euro comes on the heels of a broader warning from ECB President Christine Lagarde regarding the growing risks posed by stablecoins.
Speaking at the ninth annual conference of the European Systemic Risk Board, Lagarde argued that stablecoins are reintroducing familiar financial vulnerabilities “through the back door,” including liquidity constraints and sudden redemption pressure. While these instruments may appear innovative, she said, they still rely on fragile mechanisms that can trigger instability in moments of stress.
Lagarde pointed to the EU’s forthcoming MiCAR framework as a step forward, particularly in requiring stablecoin issuers to maintain significant reserves and allow par-value redemption. However, she warned that critical loopholes remain, especially in cross-border arrangements involving non-EU issuers who are not subject to the same rules. “In such cases, MiCAR requirements do not extend to the non-EU issuer,” she noted. If investors rushed to redeem, she added, it could strain EU-held reserves and disrupt financial stability. “We know the dangers. And we do not need to wait for a crisis to prevent them.”
Shared Risks, Shared Solutions: A Unified Approach to Digital Currency Challenges
To address these challenges, innovative solutions such as zero-knowledge KYC can be deployed to protect user identities while ensuring regulatory compliance. At the same time, offline functionality should be a core feature of the proposed app to guarantee access for all users.
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