CBDC: European Central Bank exec worries digital euro may hurt foreign currencies

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Crypto investors know well by now that institutions like the European Central Bank [ECB] are suspicious of stablecoins and often warn of their risks.

On 10 December, Fabio Panetta, an executive board member of the ECB delivered a speech that rehashed these familiar talking points. However, Panetta also revealed some new and intriguing insights about what the digital euro might do to non-EU economies.

Digital Euro, the next stablecoin?

After reviewing the need for a CBDC, Panetta expressed concern that a digital euro that could be used by non-EU residents might batter weaker foreign currencies. He said,

“Second, the digital euro could spread in third countries to the extent that it would crowd out local currencies, leading to a digital “euro-isation”, which could hamper the transmission of monetary policy and lead to financial instability.”

Panetta added,

“The risks would be greater for emerging economies that have weak currencies and economic fundamentals, and close trade and financial ties

As around 100 countries develop their own CBDCs or even test out multiple-CBDC platforms, central banks will have to think about how foreign residents might choose to use these digital currencies. Panetta further feared that the central banks in these countries might lose their autonomy because of the digital euro’s spread.

So ‘EU’ wants stability

During his speech, the exec also made it clear he wasn’t happy with the number of foreign entities in…

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