Italian Banks Back Digital Euro Initiative but Urge for Gradual Implementation Costs Amid Financial Concerns

Italian Banks Back ECB’s Digital Euro Initiative with Caveats

Italian banks have openly lent their support to the European Central Bank’s (ECB) digital euro initiative. However, they are making appeals for the varied costs linked to the implementation of this project to be extended over a number of years. This is seen as a necessity to alleviate the financial strain it places on the banking sector. Marco Elio Rottigni, General Manager of the Italian Banking Association (ABI), expressed his institution’s favorable stance towards the digital euro during a recent press seminar in Florence. He opined that the digital euro symbolizes a vital notion of digital sovereignty. However, Rottigni noted that the expenses of the project are significantly high considering the capital expenditure that banks are required to sustain. “The costs could be spread over time,” the General Manager added.

Continental Europe’s Reaction to the Digital Euro

These comments from the Italian banking official arrive at a time when the Central Bank Digital Currency (CBDC) project has encountered resistance from within the banking sector itself. Certain French and German banks have expressed their fears that the introduction of an ECB-backed retail wallet could eventually result in the draining of deposits from commercial lenders. This perspective was evident during the ECB’s Governing Council meeting in Florence late in October after a two-year preparatory period. The ECB approved the advancement of the project into its subsequent stage. They envisage a pilot phase that will come into effect in 2027, followed by a full rollout tentatively set for 2029. This schedule, however, hinges upon the adoption of EU legislation in 2026.

Proposed Scaled-Down Version of the Digital Euro

European Parliament member Fernando Navarrete, currently leading the Parliament’s scrutiny of the proposal, recently unveiled a draft report. The report urges the implementation of a pared-down version of the digital euro. This suggestion is aimed at safeguarding private payment systems such as Wero, which is a joint undertaking by 14 European banks. Rottigni echoed Navarrete’s sentiments by supporting the notion that Europe should adopt a dual approach. This approach encompasses integrating the ECB’s digital euro in tandem with commercial bank-backed digital currencies. “What Europe shouldn’t do is fall behind,” he asserted.

Next Steps for ECB’s Digital Euro Project

In the previous month, the ECB arrived at framework agreements with seven technology providers. This cooperation is purposed towards underpinning the ongoing development of a possible digital euro. These agreements focus on different aspects, encapsulating fraud and risk management, secure payment data exchange, and software development. Among the companies enlisted to support the initiative are fraud-detection specialist Feedzai and security technology firm Giesecke+Devrient (G+D). As per the ECB’s guidelines, these selected firms will also develop attributes such as alias lookup. This feature enables users to send or receive payments sans the knowledge of the recipient’s payment service provider. In addition, they are expected to develop features that support offline payment capabilities. Delivering an effective implementation of the digital euro remains a priority for the ECB. The initiative, which is met with both enthusiasm and reservation, is part of the larger shift towards digital currency, embodying the future of finance as envisioned by most of Europe’s key financial institutions. The nuances of the rollout will be closely monitored by industry observers and the banking sector at large.