With the crash of TerraUSD —the largest algorithmic stablecoin in the ecosystem— and the de-pegging of other stablecoins like Stasis, DEI (not to be confused with DAI and even Tether), financial institutions like the European Central Bank, used this weakness in their favor and started promoting their new CBDCs.
On May 16, Italian economist and Executive Board member of the European Central Bank (ECB), Fabio Panetta, said in a lecture at the National College of Ireland (NCI) that the ECB is working to have a fully functioning digital euro by 2026.
According to Panetta, the ECB has been working on a preparation phase to launch the Digital Euro. This phase will be completed in late 2023, allowing EU member countries to test the new CBDC for the next 3 years before making it publicly available.
The Digital Euro Could Boost the European Economy
The Italian economist said during his speech that the digital euro could boost the European economy when used as legal tender among all EU members. He also noted that the ECB and other institutions will help stimulate adoption through various tactics, including a heavy advertising campaign.
Panetta added that as a central body, the ECB would ensure that cash remains available to all users —even though only 20% of cash is used for payments today. A statistic is down significantly from the 35% of use that cash had fifteen years ago.
“We will ensure that cash remains available. But if the current trend continues, we could face a future in which cash loses its central role and its ability to provide an effective anchor as consumers turn to digital means of payment.”
Because of this, Panetta indicated that Governments should not allow public money to be marginalized, as this would negatively impact the economy and users, giving the big tech companies a chance to use their position and power to create an uneven playing field in which they would exercise control over their customers’ private data. Such a situation would threaten the monetary sovereignty of Europe and the whole world, Panetta argued.
CBDCs: The Soluion to Unstable Stablecoins
According to Panetta, the digital euro could help preserve confidence in fiat money by helping to “maintain its role as a monetary anchor in the digital age,” a role it has lost due to the erroneous monetary policies that have been carried out in different countries to try to safeguard the economy.
“Digital money issued by the central bank would offer the possibility for everyone to use public money for digital payments. It would be a sound, reliable means of payment designed in the public interest. And it would preserve the coexistence of sovereign and private money that has served us well so far.”
In addition, Panetta noted that stablecoins are vulnerable and have no guarantee to be redeemable at any given time. He said this based on what happened with Terra’s stablecoin, UST, which despite being one of the stablecoins with the highest market capitalization, lost its peg to the US dollar.