Bank of America analysts warned that if the digital euro is issued and widely adopted, the activities of banks operating in the European Union could be seriously affected.
Bank of America analysts said in a report that electronic euro accounts for individuals, if viewed as a popular alternative, would reduce commercial bank deposits, and may eventually harm the region’s banking industry.
“Money, like data on the Internet, has a strong tendency towards monopolization,” analysts point out.
The European Central Bank is worried about the work of the Libra Association (now Diem) to issue 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 the monopoly and may think it is better to act quickly and issue a digital euro.
Bank of America analysts view the digital euro as a “downside risk” for banks. In their view, while reducing the costs and complexity of the payment chain for individuals, it will also reduce the need for intermediaries.
“The digital euro, which is suitable for transactions, could be a convenient replacement for checking accounts,” added the experts.
Banks in Europe are already facing significant deposit requirements under the present financial system, according to the report. Therefore, competition from the widespread digital euro could further worsen the deposit situation. If the digital euro appears “in a form that is passively accepted by the population, it will become a clear negative factor for the value of the banking industry,” analysts warn.
As a reminder, several experts from the central banks of European countries recently agreed that it would take four or five years to create a viable concept for the digital euro. Earlier, ECB head, Christine Lagarde, said that, in her opinion, the EU monetary authorities could issue a digital euro in the coming between two to four years.
