Digital Euro Proposed as Solution to Cryptocurrency Risks in Europe

According to Cointelegraph, Fabio Panetta, former European Central Bank official and Governor of the Bank of Italy, has emphasized the importance of the digital euro in managing the risks associated with the increasing adoption of cryptocurrencies. In his concluding remarks on the state of the economy, presented in the Bank of Italy's annual report released on May 30, Panetta highlighted the necessity for the European Union to advance the central bank digital currency (CBDC) project to ensure financial stability and meet the demand for secure digital payments. Panetta cautioned against relying solely on regulations to control the evolution of crypto-assets, stating that rules and restrictions alone cannot mitigate the systemic risks posed by cryptocurrencies. He argued that the digital euro would be crucial in addressing these challenges. Furthermore, Panetta discussed the impact of the EU's crypto regulatory framework, the Markets in Crypto-Assets Regulation (MiCA), which became fully effective in late 2024. He noted that since MiCA's implementation, only a few electronic money token (EMT) stablecoins have been issued in the EU, with limited circulation. In Italy, there has been minimal interest in issuing crypto-assets by supervised intermediaries, although there is a growing focus on custodial and trading services. Panetta pointed out that MiCA has encouraged businesses to report their intentions to launch crypto asset services or apply for authorization. However, he expressed concerns about the risks stemming from foreign platforms, arguing that MiCA has not fully protected European investors from the dangers associated with varying regulatory approaches globally. He warned that EU citizens might be vulnerable to failures of platforms or issuers based in jurisdictions lacking adequate controls, transparency, and operational safeguards. Panetta called for stronger international cooperation and urged the EU to lead in establishing global regulatory standards. Ultimately, Panetta asserted that a digital euro, backed by the central bank, is the right tool to provide the necessary trust and functionality in a rapidly evolving payment landscape. He emphasized the need for a response that aligns with technological transformation, capable of meeting the demand for secure, efficient, and accessible digital payment instruments while preserving the role of central bank money. Panetta's remarks align with the agenda promoted by ECB executive board member Piero Cipollone, who advocates for the digital euro's launch, citing the growing popularity of US dollar stablecoins, which now constitute 97% of the stablecoin market. Panetta resigned from the ECB's executive board in October 2023, with Cipollone succeeding him. His report followed Tether's decision to skip MiCA registration for its US dollar-pegged stablecoin, USDT, in early May, with Tether CEO Paolo Ardoino expressing concerns about MiCA's impact on stablecoins and the European banking system.