ECB Economist Urges Digital Euro to Curb US Payment Dependence

European Central Bank (ECB) Chief Economist Philip Lane has reiterated the necessity for a digital euro, emphasizing its role in mitigating Europe’s reliance on US payment firms and curbing the influence of dollar-based stablecoins. Lane’s remarks, made at a conference in Ireland, underscore the importance of a digital euro in maintaining Europe’s monetary and financial independence.

Lane highlighted that a digital euro would significantly reduce the likelihood of foreign-currency stablecoins gaining traction as a medium of exchange within the euro area. This is particularly relevant as interest in stablecoins continues to surge across Europe. Currently, the stablecoin market is predominantly backed by the US dollar, with 99% of stablecoins in circulation tied to it.

Lane also pointed out Europe’s substantial dependence on American payment providers, including Visa, Mastercard, PayPal, Apple Pay, and Google Pay. According to ECB data, these US firms handle 65% of all euro area card payments, creating a vulnerability in Europe’s financial infrastructure. Some EU countries have even replaced their national payment systems with these international alternatives, further exacerbating the issue.

This reliance on foreign payment infrastructure poses a significant risk to Europe’s financial stability. It gives foreign companies control over critical parts of Europe’s payment system, making the region susceptible to policy changes and regulatory actions from outside jurisdictions. Lane argued that Europe effectively outsources its payment infrastructure by relying on international cards, apps, and stablecoins, which could lead to fragmentation in Europe’s retail payments.

A digital euro could serve as a unifying force, fostering collaboration among banks and payment service providers across the region. Lane sees it as a means to strengthen Europe’s position in the global financial landscape, particularly in the context of a fragmented and externally dependent payments system. The ECB has been developing the digital euro project since 2021 and is expected to conclude a preparatory phase by October 2025.

Lane’s call for a digital euro is the third such appeal from ECB officials this year. Earlier in March, ECB President Christine Lagarde urged lawmakers in Brussels to accelerate progress on both retail and wholesale versions of the digital euro. On March 17, ECB Governing Council member François Villeroy de Galhau expressed concerns about the potential financial instability that could arise from the push for crypto adoption. In January, ECB board member Piero Cipollone called for an accelerated digital euro launch in response to the promotion of dollar-backed stablecoins.

The European Commission has already proposed draft legislation for the digital euro, which is currently under review by the European Council and the European Parliament. Lane warned that delays in launching a CBDC could leave Europe exposed to risks, particularly as foreign stablecoins and non-European payment firms continue to expand their influence in the region. The ECB believes that introducing a digital euro would provide a secure, widely accepted payment option under European control, reducing the region’s dependence on foreign payment providers and strengthening its financial sovereignty.