Macro Musings with David Beckworth Luis Garicano on the Future of Digital Money and Lessons Learned from the History of the Euro
Jul 7, 2025
Luis Garicano, a former member of the European Parliament and London School of Economics professor, dives into the future of digital money, discussing his book on the Euro’s evolution. He highlights the risks associated with dollar-denominated stablecoins and critiques Europe's cautious approach to Central Bank Digital Currencies. Garicano also emphasizes the need for significant reforms in Eurozone policies to tackle the complexities of fiscal discipline and ensure economic resilience amidst historical challenges. His insights provide a compelling look at Europe's financial landscape.
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Europe's Cautious Digital Money Strategy
- Europe is cautious about dollar-based stablecoins due to risks of digital dollarization and financial instability.
- The Eurozone responded by developing a central bank digital currency (CBDC) with design limitations to protect banks.
Banks Central to Eurozone Policy
- Europe's monetary policy relies heavily on banks due to limited venture capital and private credit.
- Banks act as critical intermediaries for lending, payments, and regulatory oversight in Europe.
Europe Navigates CBDC Design Challenges
- Europe restricts CBDCs to avoid causing bank runs from deposit shifts.
- Regulators try to design CBDCs that are useful but don't overly compete with banks.
