Analysts at Bank of America warned that if the digital euro is issued and widely adopted, the activities of banks operating in the European Union could be seriously affected.
In a report, analysts at Bank of America said that electronic euro accounts for individuals, if seen as a popular alternative, would reduce the volume of commercial bank deposits and possibly hurt the region’s banking sector.
“Money, like data on the Internet, has a strong tendency to monopolize,” analysts note in the report.
The European Central Bank (ECB) is concerned about the work of the Libra Association (now Diem), aimed at issuing
a dollar-backed stablecoin, as well as China’s ongoing efforts to launch the digital yuan. According to analysts, “the ECB is aware of the risk” of a monopoly and may believe that “it is better to act quickly and issue a digital euro.”
Bank of America analysts see the digital euro as a “risk of deterioration” for banks. In their opinion, while reducing the cost and complexity of the payment chain for individuals, it will also reduce the need for intermediaries.
“A digital euro that is suitable for transactions may prove to be a convenient replacement for current accounts,” the analysts added.
According to the report, banks in Europe already face significant deposit requirements under the current financial system. Therefore, the competition coming from the widespread digital euro may further worsen the situation with deposits. If the digital euro appears “in a form that is massively accepted by the population, it will be a clear negative factor for the value of the banking industry,” analysts warn.
Recall that recently, several experts from the Central Banks of European countries agreed
that it will take four or five years to create a proof of concept for the digital euro. Earlier, the president of the European Central Bank, Christine Lagarde, said that, in her opinion, the EU monetary regulators can issue a digital euro in the next two to four years.