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European Central Bank leaders insist on greater centralization and tighter regulations amid macroeconomic challenges.
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The European Central Bank (ECB) is expanding the development of a wholesale central bank digital currency (CBDC) payment system to settle transactions between institutions, according to a Feb. 20 announcement.
Establishing the new system will occur in two phases. First, the CBDC settlement platform will be developed, while the second phase involves deeper integration into existing ECB systems, such as foreign currency exchange markets
ECB executive board member Piero Cipollone, the central bank official overseeing the wholesale CBDC initiative, said the program will help achieve “a more harmonized and integrated European financial ecosystem.”
The ECB has explored CBDCs in different capacities since 2020, including a consumer-facing retail digital euro and wholesale cross-border settlement between central banks.
CBDCs are often criticized due to privacy concerns, potential threats to individual autonomy by centralized state entities, and the lack of any fundamental change in the inflationary mechanics of digitized fiat currency.
Illustration showing the relationship between the value of anonymity and the number of financial service providers. Source: European Central Bank
Related: EU needs a permanent CBDC — Deutsche Börse CEO
ECB doubles down on CBDC amid a ban in the United States
US President Donald Trump signed an executive order on Jan. 23 prohibiting the development of a CBDC in the United States and commissioning a working group on digital assets to study a digital asset reserve.
Yifan He, founder of blockchain firm Red Date Technology, told Cointelegraph that Trump’s order likely impeded all CBDC projects worldwide, creating challenges for these initiatives.
Following Trump’s ban on CBDCs, Cipollone doubled down on his rhetoric — arguing the EU needs a digital euro to compete with privately issued stablecoins.
President Trump signing the executive order banning CBDCs and establishing the Working Group on Digital Assets. Source: The White House
Cipollone added that the growth of privately issued cryptocurrencies and stablecoins would further disintermediate commercial banking institutions and central banks as people increasingly turn to digital alternatives.
During a press conference on Jan. 30, ECB president Christine Lagarde told reporters she was “confident” that central banks under the eurozone system would not adopt Bitcoin (BTC) as a reserve asset.
Lagarde implied Bitcoin was too volatile, illiquid and unsafe to be used as a reserve for Europe’s banking institutions.
Magazine: Asian crypto traders profit from Trump’s win, China’s 2025 CBDC deadline: Asia Express
This article first appeared at Cointelegraph.com News
