The European Central Bank’s Villeroy expresses the threat of the digital renminbi

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Earlier Wednesday, the President of the Bank of France François Villeroy de Galhau (François Villeroy de Galhau) made some interesting remarks about everyone’s favorite currency revolution (or evolution, Depends on who you ask). In other words, create a central bank digital currency (CBDC).

by Bloomberg European Central Bank reporter Carolyn Look (emphasis ours):

François Villeroy de Galhau, a member of the European Central Bank Management Committee, said that China’s rapid progress in developing a digital renminbi poses a key risk to safeguarding the international role of the euro. ..

… Villeroy OK As part of the “risk triangle”, “the progress made by CBDC outside of Europe, especially the digital renminbi” Challenge the European Central Bank’s control over payments. He also highlighted the decrease in the use of cash and the rise of crypto assets.

It looks like Point outThis is the first time that the European Central Bank has publicly admitted that the reason for promoting its own-brand CBDC digital euro is that the People’s Bank of China is about to seize the first mover advantage.Currently being piloted Electronic element And it looks like it will be the first major central bank to launch a CBDC.

So far, the official line of the European Central Bank has been to launch the Eurozone CBDC to challenge large technology companies, not to resist geopolitical threats.

But does the president of the Bank of France make sense?

We suspect that there are as many questions as Villeroy asked.

In our view, China’s electronic renminbi is more to seize control of the payment system (and the potential to provide credit to customers) from Alipay and WePay, rather than an attempt to global currency hegemony.

What we want to add is that a bigger obstacle to the internationalization of the euro area is the lack of financial assets to support its capital market in the single currency area. In terms of liquidity and scale, the U.S. Treasury market has no competitors-before that, the euro will not make significant progress in competing with the U.S. dollar. Simple as.

We do believe that having our own digital currency that can be used internationally has a geopolitical advantage. But the problem is more about making yourself less dependent on the United States than on China.

If the European Central Bank can facilitate cross-border payments through the infrastructure built around the digital euro, the region may find itself able to avoid Germany did it in 2018At that time, it was forced to succumb to pressure from the United States and cut off the 300 million euros of funds held by Iranian banks in the Bundesbank.The centrality of the Global Interbank Financial Telecommunications Association, or rapidPromoting global payments (and the US influence on them) has always been the key to maintaining Washington’s influence. We believe that the ability to evade SWIFT and US sanctions may also interest some people in Beijing.

Nevertheless, we are more worried that the European Central Bank will use this so-called China threat as a means to drive out the digital euro. Villeroy has made no secret of his desire for CBDC in the past. For example, he likes him more than his colleague Jens Weidmann (Jens Weidmann) of the Bundesbank. We increasingly believe that he is more likely than the governor of the Bundesbank to get his wish.

In any case, this is our two cents on this topic. Of course, delivered digitally. You are in the usual place.

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