Bank of Spain warns: the expansion of the digital euro as an investment may threaten financial stability

MADRID, 31 Ago. (EUROPA PRESS) -

The deputy governor of the Bank of Spain, Margarita Delgado, has warned that an uncontrolled expansion of the digital euro as a form of investment could threaten the authorities' ability to maintain financial stability.

During the reception dinner of the Annual Conference of the Central Bank Research Association (CEBRA) that took place last night, Delgado focused his speech on central bank digital currencies, acknowledging that their deployment in the Eurosystem could strengthen confidence in money public and private and contribute to preserving monetary autonomy.

“The mere existence of a digital euro would offer an alternative solution in case of geopolitical tensions. Furthermore, when carefully designed, a digital euro could be a catalyst for innovation on a broader scale, as it could support the role of intermediaries. in the development of new types of services, in addition to enjoying a pan-European scope", he valued.

On the risk side, Margarita Delgado acknowledged that the greatest source of concern is the possibility that an uncontrolled expansion of the digital euro as a form of investment "threatens the authorities' ability to adequately maintain financial stability."

An overly attractive and accessible digital euro could encourage a significant migration of bank deposits, thus compromising their intermediation and lending capacity, as well as likely destabilizing the entire banking system in times of financial stress.

On the other hand, the deputy governor of the Bank of Spain warned that, if anonymity were allowed as a means of providing the highest possible level of privacy, the fight against money laundering and the financing of criminal activities would be compromised, calling into question judgment on the effectiveness of the tools to limit the use of the digital euro as a store of value.

In this sense, Delgado advocated achieving "a balance" between minimizing the participation of the Eurosystem and intermediaries in the processing of user data and guaranteeing compliance with the law.

Another risk referred to by the deputy governor is the probability that the digital euro will increase the operational responsibility of the Eurosystem over payment channels, since it remains responsible for the general operation of the digital euro architecture, potentially putting its reputation at risk.

In this context, Delgado recalled that the ongoing debates on the design of the digital euro are currently focused on the possible safeguards that could be incorporated to avoid the aforementioned risks.

"As of today, operational and legal considerations have been the bulk of our work so far. The digital euro project has little chance of success unless it can be shown to start from a solid theoretical foundation," said Deputy Governor .