Joachim Nagel, President of the German Central Bank (Bundesbank) and member of the European Central Bank (ECB) Governing Council, said that issuing a euro-pegged stablecoin could both reduce costs in cross-border payments and be an important tool against the risk of “dollarization” created by dollar-based stablecoins.
Speaking at the German-American Chamber of Commerce, Nagel emphasized that euro-denominated stablecoins could offer individuals and companies a low-cost and fast way to make international payments.
According to Nagel, the replacement of a country’s local currency with dollar stablecoins effectively means the dollarization of that economy. This, he argues, could weaken the effectiveness of monetary policy and negatively impact Europe’s economic sovereignty.
Nagel also stated that the ECB is evaluating the use of distributed ledger technology (DLT) in financial instruments other than central bank money. Options such as tokenized deposits and euro stablecoins are reportedly on the table.
Nagel also touched upon the ECB’s digital euro project, reminding that the institution plans to launch the digital euro in 2029. It was also noted that the ECB is working on a “wholesale” CBDC that would enable financial market institutions to conduct programmable transactions.
The announcements come at a time when Europe is accelerating its search for alternatives to dollar-centric solutions in the field of digital finance.
*This is not investment advice.