ECB pushes for digital euro in response to Trump's crypto executive order that could further 'disintermediate banks'

Eurozone banks need a digital euro to counter United States President Donald Trump's efforts to promote worldwide U.S.-backed stablecoins, according to European Central Bank (ECB) board member Piero Cipollone. Speaking at a policy meeting in Frankfurt on Friday, Cipollone highlighted the potential impact of Trump's latest initiative on global finance.

On Thursday, Trump signed an executive order aimed at bolstering U.S. leadership in digital financial technology, emphasizing the protection and promotion of the U.S. dollar's sovereignty. The order includes provisions to support, "the sovereignty of the United States dollar, including through actions to promote the development and growth of lawful and legitimate dollar-backed stablecoins worldwide."

At the Institute for Law and Finance’s 13^th Conference on the Future of the Financial Sector, Cipollone cautioned that the Trump administration move could further attract customers away from traditional banks, amplifying the need for the ECB to accelerate its digital currency plans. "I guess the key word here in Trump's executive order is worldwide," Cipollone told a conference in Frankfurt on Friday, according to Reuters. "This solution, you all know, further disintermediates banks as they lose fees, they lose clients...That's why we need a digital euro."

The function of a digital euro

A digital euro would function as an online wallet guaranteed by the ECB but operated by private entities, such as banks. This system would enable users, including those without a bank account, to make payments. However, individual holdings would likely be capped at a few thousand euros and would not earn interest.

The ECB is currently testing how a digital euro might work in practice but will defer a final decision on its launch until the bloc's lawmakers pass the necessary legislation.

In contrast, U.S. President Donald Trump's recent executive order explicitly prohibits the Federal Reserve from issuing its own central bank digital currency, underscoring his administration's focus on promoting private, dollar-backed stablecoins instead.