The discussion surrounding the digital euro is strategically important to Europe. On Dec. 12, the EU finance ministers are aiming to agree on a general approach regarding the dossier. This sets out the European Council’s official position and thus represents a major political milestone for the European Council ahead of the trilogue negotiations. We want to be sure that, in this process, the project will be subject to critical analysis that is objective and nuanced and takes account of the long-term interests of Europe and its people. > We do not want the debate to fundamentally call the digital euro into question > but rather to refine the specific details in such a way that opportunities can > be seized. We regard the following points as particularly important: * maintaining European sovereignty at the customer interface; * avoiding a parallel infrastructure that inhibits innovation; and * safeguarding the stability of the financial markets by imposing clear holding limits. We do not want the debate to fundamentally call the digital euro into question but rather to refine the specific details in such a way that opportunities can be seized and, at the same time, risks can be avoided. Opportunities of the digital euro:  1. European resilience and sovereignty in payments processing: as a public-sector means of payment that is accepted across Europe, the digital euro can reduce reliance on non-European card systems and big-tech wallets, provided that a firmly European design is adopted and it is embedded in the existing structures of banks and savings banks and can thus be directly linked to customers’ existing accounts. 2. Supplement to cash and private-sector digital payments: as a central bank digital currency, the digital euro can offer an additional, state-backed payment option, especially when it is held in a digital wallet and can also be used for e-commerce use cases (a compromise proposed by the European Parliament’s main rapporteur for the digital euro, Fernando Navarrete). This would further strengthen people’s freedom of choice in the payment sphere. 3. Catalyst for innovation in the European market: if integrated into banking apps and designed in accordance with the compromises proposed by Navarrete (see point 2), the digital euro can promote innovation in retail payments, support new European payment ecosystems, and simplify cross-border payments. > The burden of investment and the risk resulting from introducing the digital > euro will be disproportionately borne by banks and savings banks. Risks of the current configuration: 1. Risk of creating a gateway for US providers: in the configuration currently planned, the digital euro provides US and other non-European tech and payment companies with access to the customer interface, customer data and payment infrastructure without any of the regulatory obligations and costs that only European providers face. This goes against the objective of digital sovereignty. 2. State parallel infrastructures weaken the market and innovation: the European Central Bank (ECB) is planning not just two new sets of infrastructure but also its own product for end customers (through an app). An administrative body has neither the market experience nor the customer access that banks and payment providers do. At the same time, the ECB is removing the tried-and-tested allocation of roles between the central bank and private sector. Furthermore, the Eurosystem’s digital euro project will tie up urgently required development capacity for many years and thereby further exacerbate Europe’s competitive disadvantage. The burden of investment and the risk resulting from introducing the digital euro will be disproportionately borne by banks and savings banks. In any case, the banks and savings banks have already developed a European market solution, Wero, which is currently coming onto the market. The digital euro needs to strengthen rather than weaken this European-led payment method. 3. Risks for financial stability and lending: without clear holding limits, there is a risk of uncontrolled transfers of deposits from banks and savings banks into holdings of digital euros. Deposits are the backbone of lending; large-scale outflows would weaken both the funding of the real economy – especially small and medium-sized enterprises – and the stability of the system. Holding limits must therefore be based on usual payment needs and be subject to binding regulations. -------------------------------------------------------------------------------- Disclaimer POLITICAL ADVERTISEMENT * The sponsor is Bundesverband der Deutschen Volksbanken und Raiffeisenbanken e.V. , Schellingstraße 4, 10785 Berlin, Germany * The ultimate controlling entity is Bundesverband der Deutschen Volksbanken und Raiffeisenbanken e.V. , Schellingstraße 4, 10785 Berlin, Germany More information here.

BRUSSELS — The head of Wall Street’s top watchdog is “absolutely not” concerned about the body’s independence from the White House. Securities and Exchange Commission Chair Paul Atkins told POLITICO in an interview that President Donald Trump has the power to oust the head of the body and its commissioners. “It’s clear from the law and Supreme Court rulings that we’re part of the executive branch and the president can fire me and the other commissioners,” he said. “He’s [Trump] the head of the executive branch. So I think that goes without saying.” His comments come amid Trump’s repeated attacks on the head of the Federal Reserve, Jerome Powell, as well as his attempts to fire Lisa Cook, a member of the board. Asked whether he has concerns about the SEC’s independence, Atkins said: “No. Absolutely not.” But, he added: “As far as the SEC goes,” he is “confident we could do our job as we have been doing it now for 90 years.” Atkins declined to provide an opinion on Trump’s attacks on Powell — the president has described the Fed chair as a “moron” and a “numbskull” — saying: “That’s another agency altogether. They can — Jay Powell and the president — work out those sorts of things.” CRYPTO RESERVE Atkins praised Trump for his plans to set up a strategic Bitcoin reserve and digital assets stockpile following a presidential executive order. “The U.S. government has seized a lot of Bitcoin and other things. … I think it’s smart not to dump it on the market, frankly, and so I salute the efforts of the president and the Treasury Secretary [Scott Bessent] and others to address that issue.” The SEC chair has unveiled an ambitious agenda for stablecoin regulation known as “Project Crypto,” which he described as a move away from a “head-in-the-sand” approach from the regulator toward the digital technology. “The SEC needs to embrace change. And if you do the opposite … if you are not embracing it, then it goes offshore,” he said, citing the example of FTX, the crypto exchange which was headquartered in the Bahamas and collapsed in 2022. GREEN STANDARDS Atkins has made his dislike of EU rules for corporate sustainability reporting clear, criticizing them in a speech in Paris earlier this week. He has also threatened to withdraw U.S. recognition of international accounting standards over the inclusion of sustainability in their methodology. Asked whether he disagrees with the European Central Bank’s approach of factoring the risks posed by climate change into their policymaking, Atkins said: “Yes, in a word.” “We’re not here to be environmental police or social police or whatever. That’s not our job. And if others want to do that, then that’s up to them,” he said. Atkins said “it doesn’t matter what I believe” regarding his personal views on climate change, adding that the SEC’s position “long before me” was that climate change does not pose a risk to the orderly functioning of financial markets. “I’m just continuing with that. I agree with that position,” he said. ENFORCEMENT AGENDA Separately, Atkins defended the appointment of Meg Ryan, a judge, to the role of head of the SEC’s enforcement division. Her hire broke with a precedent of appointing someone with long experience in securities law. But Atkins said critics are “people who are ignorant, frankly, of how things work.” “Judges don’t come ready-made with knowledge of the securities world,” he said, adding that Ryan is “eminently qualified to take this position.” Judges “learn it on the job, they apply their experience and their knowledge to the case at hand, and they study up and they’re smart people and that’s their job,” Atkins said.

The European Central Bank is preparing for its new digital version of the euro to take the payments market by storm — even though much of the public is unsure it wants anything to do with it. Internal ECB documents show the bank wants the digital euro system to be able to handle more than 50 billion transactions a year from the get-go, central bank officials told POLITICO. Such massive capacity suggests that ECB expects the digital currency to transform the retail payments market, pressuring a key revenue stream for current payment providers: If run at maximum capacity, the digital euro could snatch more than a third of the transactions currently done by payment cards. According to a presentation to the ECB’s governing council by the bank’s digital euro team last month, it needs a system that can handle 50.5 billion transactions annually, two officials said. While that is neither a target nor a forecast, it’s still a striking statement of confidence in the project’s potential. For context, payment cards were used in 84.6 billion transactions worth a total of €3.2 trillion across the eurozone last year, with card issuers and associated services providers taking a commission on most of them. Assuming annual growth of 10 percent as cash continues to lose ground, there could be close to 125 billion card transactions in 2028 — the year currently seen as the earliest possible launch date for the digital currency. At full capacity, the digital euro would thus have a market share of around 40 percent. A large part of payment fees currently goes to companies such as Visa and Mastercard and other fintech firms located outside Europe. The ECB wants the digital euro not just to stop such leakage, but to end Europe’s technological reliance on the infrastructure of U.S. payment giants more broadly, fearful of the shifting geopolitical environment. A whopping two-thirds of card transactions in the euro area are currently settled through international payment schemes and more than half of EU countries rely entirely on non-European solutions. The ECB has never publicly shared any estimates of what market share it expects the digital euro to take, but has always stressed that it has no plans to crowd out private-sector alternatives. The numbers in the presentation suggest the private sector may feel very squeezed. The ECB declined to comment. TAKING OVER, OR NO TAKERS? If the planning for broad and rapid adoption is accurate, consumers may see lower prices and Europe may bolster its strategic autonomy — but the region’s payments providers may see less reason to cheer. Industry bodies such as Payments Europe have warned the digital euro could wreck card-based revenue models, especially if its basic services are offered for free. Widespread use of the digital euro in transactions also suggests that consumers will opt to hold them in electronic wallets, draining deposits from the banking system. Bankers say that could limit the amount they have available to lend to households and business. “The impact on savings and retail banks of the digital euro taking a big chunk of card transactions will depend on the holding limits the ECB imposes, and [on] the underlying business model of the digital currency,” said Diederik Bruggink, senior director of payments, digital finance and innovation at the European Savings and Retail Banking Group. The higher the holding limits allowed for the digital euro and the lower the fees for payments between service providers, the worse it will be for banks, he explained. A large part of payment fees currently goes to companies such as Visa and Mastercard and other fintech firms located outside Europe. | Luong Thai Linh/EPA According to European Banking Authority estimates, fees and commissions account for around 30 percent of net operating income at the continent’s banks, and payment-related fees account for more than a quarter of that. The ECB has argued that the digital euro could offer fresh business opportunities for domestic service providers that are finding it increasingly difficult to compete with international card schemes and mobile payment solutions. Not only can banks serve as wallet providers and create other add-on services, but by embedding digital euro services, banks can retain customers who might otherwise migrate to Big Tech wallets, it argues. The question is whether the public can bring itself to care. After a slow start, recent surveys show awareness and interest may be taking off. A survey by consultants BearingPoint in February showed one-third of respondents across the eurozone would be willing to use the digital euro, a share that seems likely to rise with generational change. But a survey by Payments Europe showed that 56 percent of consumers today are unsure whether they ever would. While no decision on launching a central bank digital currency can be taken without legislation from the European Parliament, the project’s technical development continues to gather momentum. In the same presentation, the digital euro team argued that, should all legislative hurdles be cleared, the ECB governing council should approve close to €1.5 billion to bring the project to life.

The rise of dollar-linked stablecoins threatens Europe’s push to elevate the euro’s global standing and may ultimately weaken the European Central Bank’s control over the economy, three ECB officials told POLITICO. Their comments come following a seminar on stablecoins — cryptocurrencies pegged to the value of official currencies — held alongside the ECB’s regular policy meeting in July. Policymakers’ scrutiny of these fast-growing digital assets has also increased as their market value has more than doubled — from $125 billion to roughly $255 billion — in under two years. Nearly 99 percent of that is tied to the U.S. dollar. Officials fear the increasing adoption of stablecoins could entrench dollar dominance in global finance and quash any hopes of the euro becoming a serious contender to the U.S. currency. “This trend hurts Europe’s efforts to boost the international role of the euro and the geopolitical influence that comes with it,” said one Governing Council member, granted anonymity to speak freely about a sensitive topic. The recent U.S.-EU trade deal served as a stark reminder of how much U.S. dominance over the global financial system affects the transatlantic power balance. Acutely aware that Europe is punching below its weight, ECB President Christine Lagarde urged Europe’s leaders to seize the “euro moment” created by the shift in the global order to boost the role of the single currency. The U.S. administration has supported developing dollar-linked stablecoins as a way to shore up the greenback, even as uncontrolled budget deficits, erratic trade policy and political interference in monetary policy and economic data reporting all work to undermine international confidence. Most current stablecoin activity is concentrated in emerging markets, prompting ECB executive board member Piero Cipollone to warn of “destabilizing effects” as a result of “digital dollarization”, particularly on emerging markets and less developed economies. But ECB officials warn that if European consumers turn to dollar-backed digital assets in large numbers, it could pose a significant risk to control of the money supply in the eurozone. “Should U.S. dollar stablecoins become widely used in the euro area, whether for payments, savings or settlement, the ECB’s control over monetary conditions could be weakened,” Jürgen Schaaf, a long-time digital euro advisor in the ECB’s Market Infrastructure and Payments department, said in a blog post last week. “Without a strategic response, European monetary sovereignty and financial stability could erode.” BEST DEFENSE For years, ECB officials have framed the launch of a digital euro as Europe’s most effective response to the threat posed by foreign digital currencies. The goal is to provide a trusted, euro-denominated alternative that would make it safer and easier for citizens and businesses to stay within the eurozone’s monetary framework. A digital euro would offer the advantages of digital currencies without the currency substitution risk. Lagarde has redoubled her efforts to move the project forward, urging lawmakers to act swiftly. “A legislative framework to pave the way for the potential introduction of a digital euro should be put in place rapidly,” she told the European Parliament in June, calling it a “strategic priority” to address the risks posed by stablecoins. According to one member, the Governing Council remains skeptical of stablecoins, echoing concerns voiced by the Bank for International Settlements that they fail to meet the standards of “sound money” and suffer from insufficient regulation. Another colleague, however, acknowledged there may be a limited role for euro-linked stablecoins serving as a bridge between the two systems until the digital euro is launched, which could still take several years. Similarly, Schaaf noted that they “could serve legitimate market needs” and “could also reinforce the international role of the euro.” There tends to be a broad divide between politically left- and right-leaning economists, with the latter generally more open towards supporting a technology that has been largely advanced by the private sector. Economists Jens van ’t Klooster, Edoardo Martino, and Eric Monnet are convinced that mimicking the U.S. stablecoin model would be a strategic misstep. “This is neither realistic, given the incumbency advantage of the dollar, nor is euroization of third countries through risky stablecoins per se good for the EU,” they wrote in a recent paper for the Center for Economic Policy Research. Instead, they urged Brussels to focus on positioning the euro as a globally trusted, safe asset — backed by sound institutions and regulation. “The EU should stick to promoting the internationalization of the euro as a safe asset that can be held without constraint,” they argued. Third countries may then use the euro to offset the risk of stable coin-driven dollarization, raising long-term demand for the single currency.