A power struggle has emerged between European Union governments and the European Central Bank (ECB) regarding control of the digital euro.
The conflict centers on who will set limits on the amount of digital currency individuals can hold in central bank-backed wallets.
As the ECB develops the digital euro to compete with U.S. payment giants like Visa and Mastercard, major EU nations, particularly France and Germany, argue that the central bank has overstepped its authority. The current draft regulation grants the ECB exclusive power to determine wallet limits, which member states contest, claiming the digital euro’s implications extend beyond monetary policy.
Concerns arise about financial stability, as high wallet limits could lead citizens to withdraw large sums from traditional banks during crises, threatening the banking system and infringing on individual financial autonomy. While the ECB maintains its role in ensuring banking stability, member states advocate for legislative oversight of supervisory functions.
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Proposed compromises suggest that legislators could set parameters for the ECB’s decisions, but doubts remain about the need for democratic oversight. This conflict reflects a broader reassessment of political versus central banking authority, occurring as over 100 central banks globally explore national digital currencies, inspired by Facebook’s 2019 Libra proposal. The ECB views the digital euro as essential for reducing Europe’s reliance on non-EU payment services.
EU Governments Contest ECBs Dominance in Controlling Digital Euro 