If banks continue to be essential to the flow of money as they already are, plans for a digital euro would be “very good” for the currency bloc and its lenders, according to Andrea Orcel, chief executive of UniCredit.

Orcel stated, “It’s a matter of sovereignty for Europe: we cannot have a digital euro,” during a conference hosted by the Italian bank Mediobanca.

The European Central Bank is planning to introduce a digital currency that would fight the rise of non-European online payment businesses like Paypal and lessen the euro zone’s need on antiquated electronic payment systems run by American corporations like Visa and Mastercard.

“I think the question is how it will happen: … are banks going to be the infrastructure and the framework for a digital euro like they are for the cash euro?,” Orcel said.

“If banks are fully integrated, i.e. ‘Dear Customer, you can have cash or you can have digital’ … then it’s seamless and it will be very good for Europe and very good for banks,” he added.

However, the former UBS investment banker stated that a parallel system to banks for the digital euro would have a major influence on the industry by bringing about significant changes in banks’ already-undergoing-a-transformation business model.

More adjustments for the industry. Either way, we’re getting ready for it,” he remarked.

A member of the ECB Executive Board, Piero Cipollone, demonstrated through slideshows to the Italian banking association in April that commercial banks will be in charge of providing digital euro services to their clientele.

Merchants would pay a fee to the payment service provider processing the digital euro payment, which would then pay a fee to the commercial bank, even though that service would be offered free of charge to customers.

The European Central Bank said on Wednesday that it is prepared to pay partners in the private sector €1.2 billion to assist in the development of a digital version of the euro, an announcement that was not anticipated to come about until 2024.

The responsibilities assigned to the institutions that pass must go beyond developing an app for the digital euro. According to the ECB, they will also be obliged to handle fraud and provide offline payment alternatives.

The central bank declared that it will look for collaborators for five different projects.

With a €662 million budget, developing offline payments comes first, followed by risk and fraud management with a €237 million framework.

“Developing a wallet requires distinct skills compared to creating an offline back-end solution,” stated Jonas Gross, the head of the Digital Euro Association and the chief operating officer of Etonec, a cryptocurrency payments company.

An official at the European Union’s central bank claims that PayPal’s new stablecoin poses a danger to the financial stability of the region.

The ECB’s action seems to be a significant advancement in the goal of simulating actual currency in the $19 trillion global economy that is the world’s largest trade area.

Supporters of the initiative seek to enhance the financial infrastructure of the eurozone and provide Europeans with a domestic payment system, despite the fact that many are sceptical about the legality of the digital euro.

In fact, the ECB stated that it is “not making a commitment to launch any of the development work listed” in the release.

(Adapted from USNews.com)

Categories: Economy & Finance, Regulations & Legal, Strategy, Sustainability