The European Central Bank believes that PayPal's decision to launch its own stablecoin eloquently makes the case for the development of a digital euro.
In introductory remarks to the Committee on Economic and Monetary Affairs of the European Parliament in Brussels, ECB executive Fabio Panetta, emphasises that in the absence of a digital euro, the emergence of potentially dominant private actors in the digital payments market could have a strong impact on the financial sector.
While Facebook's bid to launch its own currency was dashed by regulatory hurdles, Panetta points to PayPal's recent launch of its own private stablecoin as a new emergent threat:
"Private providers of payment services, including PayPal, have no incentive to limit the take-up of their stablecoins or the range of services they provide. Quite the opposite: their objective is to expand their customer base and gain market share.
"They may have no incentive to make their payment solutions compatible with those used today. They could offer services at low cost, given the revenue they could generate by reinvesting the reserve assets in an environment with positive interest rates. And while the market entry of big techs or other large payment providers may initially promote innovation, competition could be severely hampered if they attain a monopolistic position, as we have seen in other digital sectors."
By contrast, he says, a digital euro would be introduced by public authorities, under a European regulatory framework, with safeguards built in to protect consumer privacy and preserve the primacy of the banking sectors.
The investigation phase into the design and technical options for a future digital euro is nearing its close, with a report on progress scheduled for next month. At this point, the ECB will decide whether to press ahead with the project.
"Europe should not shy away from being ambitious in developing an instrument that serves the public interest by making Europe and the euro fit for the digital age," Pantta tells the Committee in closing remarks. "The digital euro will give us a digital means of payment that, like cash, unites us because it can be used by everyone, everywhere. It will strengthen our autonomy and resilience by relying on a European infrastructure and reducing our dependence on a handful of non-European providers."