Recently, an ECB policy maker announced an update on the development of the digital euro and this sparked the debate again. On Wednesday, 24th August, 2022, Bank of Finland Governor, Olli Rehn said it is expected that the investigation phase of potential digital euro would be finished by October next year. The ECB’ decision to develop a digital euro would be dependent upon the investigation.
President of European Central Bank Christine Lagarde and Executive board member Fabio Panetta recently published a blog post. It consisted of the important objectives that ECB executes from digital euro would serve. One of the key objectives is that the general public could use the digital currency.
The ECB played a silent move where it did not reveal any information regarding the ongoing process and development of digital euro till date. It directly puts a certain timeline of wrapping up the investigation. Although there is information in the public domain about the possible circulation of digital euros which is expected to be around 1.5 trillion.
CBDCs Would Finish Stablecoins
Emergence of CBDCs like digital euro could pose a threat to regular cryptocurrencies, especially those which conduct cross-border payments like Ripple (XRP) and stablecoins. Although this may sound absurd, since for quite long the debate was around the issue that crypto assets pose risks for traditional finance. This is expected to happen given the features of CBDCs which replicate almost all the utilities that cryptocurrencies serve.
Take an instance of the possibility of CBDCs replacing Ripple (XRP). Currently, the latter provides the services of cross border payment settlements using the native asset token XRP. If CBDCs would serve a similar objective then this would reduce the use of Ripple and XRP. Eventually it would affect the price of the crypto asset and gradually it could experience an existential threat.
Skepticism due to Crypto Regulations and Ban
The uncertainties regarding the possibility of strict crypto regulations or an outright ban also weakens the stance of cryptocurrencies. In case of crypto assets ban, the users will be left with the only option of using central bank digital currencies (CBDCs).
Source: https://www.thecoinrepublic.com/2022/08/25/ecb-updated-on-digital-euro-development/