Frankfurt — European legislators are voicing fresh doubt about the European Central Bank’s (ECB’s) digital euro project after an outage in the bank’s existing payment system caused delays for thousands of households and traders.
The breakdown in the Target 2 (T2) payment system late last month meant banks could not settle transactions with each other for the better part of a day, partly due to an initial, wrong diagnosis of the issue by central bank technicians.
Representatives from four of the eight groups that make up the European Parliament said the incident raised some questions about the ECB’s ability to deliver on its digital euro project, a new payment system open to all eurozone residents.
“This instance is a blow to the ECB’s credibility,” said Markus Ferber of the European People’s Party, the largest group in parliament.
“People will ask legitimate questions how the ECB will be able to run a digital euro when they cannot even keep their day-to-day operations running smoothly.”
An ECB official said a digital euro would be more similar to its instant payment system TIPS, which is also 24/7 and handles millions of small payments every day, than to T2, which settles fewer but bigger transactions, and the former has been extremely reliable.
Indeed TIPS only suffered minor delays on the day of the outage.
But resistance from legislators may still prove a hurdle for the ECB, which needs them to pass legislation laying the ground for the digital euro.
The European Commission proposed digital euro legislation in June 2023 but not much has happened since amid scepticism from some legislators and bankers.
Rasmus Andresen, a Green politician who sits on the parliamentary committee that oversees the ECB, said the central bank had to restore citizens’ trust or the digital euro may be “at risk of failure”.
Jussi Saramo, of The Left group, still backs the launch of a digital euro but stressed “the need for the ECB to improve its own systems”.
Their colleague Johan Van Overtveldt, from the Eurosceptic European Conservatives and Reformists Group, said “the ECB should prove that it can maintain uninterrupted and secure financial infrastructure” before moving on with the digital euro.
This would essentially be an electronic wallet guaranteed by the central bank, which would also provide the infrastructure. It would be distributed by companies such as banks or wallet providers.
The ECB has pitched it in part as a response to US President Donald Trump’s push to promote stablecoins, a type of cryptocurrency typically pegged to the US dollar and increasingly used as a form of digital payment.
But bankers have mostly been sceptical, fearing that it would empty their coffers as customers transfer some of their cash to the safety of an ECB-guaranteed wallet.
The ECB hopes legislation will be in place by the autumn so it can vote to officially launch the project.
Reuters
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