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- Italy warns that US stablecoin policies may hurt Europe’s financial independence.
- Stablecoins are becoming a preferred method for cross-border transactions.
- A digital euro is seen as essential to protect the euro’s relevance and sovereignty.
Italy’s economy minister raised alarms over the growing use of US dollar-backed stablecoins. He believes they pose a greater threat to Europe than US trade tariffs. While tariffs affect specific industries, stablecoins could shake the foundation of Europe’s financial system.
One of these digital assets, which people widely perceive as secure and efficient, is gaining popularity across borders. For most, they present a quick and convenient alternative to bank transfers. The worry is in their silent propagation.
As users embrace these payment methods, they may decrease the demand for the euro in international trade. This trend may diminish the role of the euro in international markets. It would curb Europe’s power and leave it more reliant upon American financial technology.
Stablecoin Use Grows Inside the Eurozone
The minister referred to the explosive growth of stablecoins denominated in dollars in recent years. Such coins now exchange billions daily. They facilitate storing and transferring money without banks. Individuals from countries with weaker currencies are particularly attracted to them.
Nonetheless, they are becoming desirable even in the eurozone. If Europeans turn to stablecoins for everyday payments, they may harm local banks. Money would drain from savings accounts to online wallets.
This would restrict liquidity in the banking sector. Additionally, non-European payment providers would have control over essential infrastructure. This presents threats to both economic security and privacy.
Its impact depends on how broadly people use it. Stablecoins, largely denominated in the US dollar, would compete with this usage. The consequence would be loss of strategic independence in sectors such as trade, savings, and investment.
ECB Moves Fast on Digital Currency Plans
Previously, the European Central Bank accelerated plans to launch a digital euro. The official digital money would be secure, stable, and available to all EU inhabitants. Individuals would be able to use it to pay online, at shops, or even to send money to friends. Most importantly, the ECB would guarantee it, not foreign private companies.
The goal of the digital euro is to maintain Europe’s sovereignty over payments. It presents an avenue to bring the financial system up to speed without compromising monetary sovereignty. EU officials believe this action will prevent the proliferation of foreign competition.
Europe’s payments sector remains fragmented. Unless there is collective action, foreign coins will likely take over in day-to-day transactions. Which makes the digital euro not only an idea but a necessity.
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