PARIS (Reuters) – Europe’s sovereign control over its currency is at risk if it does not advance plans for a digital euro and a European payment system, the head of France’s central bank said on Wednesday .
More than 30 European banks are currently implementing a retail system for instant transactions and payment cards to compete in a market currently dominated by foreign companies such as Visa and Mastercard.
With the COVID-19 pandemic encouraging consumers to ditch cash and big tech companies entering the market, Banque de France Governor François Villeroy de Galhau said time was running out to put new ones in place. infrastructure, with maybe only a year or two.
Some banks are worried about investing in new payment infrastructure if the European Central Bank goes ahead soon after with plans for a new digital currency that could be used by their retail customers.
“On digital currency and payments, we in Europe must be prepared to act as quickly as necessary or risk an erosion of our monetary sovereignty – something we cannot tolerate,” Villeroy said at a conference at Paris Europlace.
With 90% of the world’s central banks now working on digital currencies, concerns have arisen about the possibility of draining money from existing bank accounts. Morgan Stanley estimated this month that a digital euro could divert 8% of customer deposits from eurozone banks.
Rather than supplanting banks, Villeroy said they would be used to distribute central bank digital currency (CBDC) at the retail level and that at the wholesale level this could make the settlement easier and more secure transactions.
“In short, the scenario of a CBDC causing massive bank disintermediation is more of a finance fiction fantasy than a serious analysis,” Villeroy added.
The Banque de France has already conducted five tests with CBDC with public and private financial institutions and plans four more before the end of the year.
Reporting by Leigh Thomas; Editing by Alison Williams