Snippings

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Keynote speech by Philip R. Lane, Member of the Executive Board of the ECB, University College Cork Economics Society Conference 2025

Cork, 20 March 2025

From: The digital euro: maintaining the autonomy of the monetary system.

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central bank money would play a much-diminished role in the payments system, if households and firms were to maintain their primary transaction accounts in stablecoins and only use commercial bank accounts to upload and download funds from these transaction accounts

 

n a sense, a stablecoin provider would resemble a so-called narrow bank that only holds high quality liquid assets and promises to maintain a stable value of its liabilities (the funds held by customers in their stablecoin accounts). While the pros and cons of narrow banking have been much debated over the decades, a material decline in the volume of deposits held in commercial banks would disrupt the role of commercial banks in credit provision, which is especially prominent in the bank-based European financial system. 

 

The digital euro is also an effective tool to limit the dominance of foreign digital currencies, including the monetary sovereignty risks created by widely-adopted foreign-currency stablecoins. Furthermore, in a world dominated by platform-based payment systems, where payments are bundled with other services in closed ecosystems, a digital euro would provide an open and interoperable alternative, preventing the fragmentation and limited interoperability of money.

In Europe, the digital euro is on the drawing board and will enter its “second phase” of preparation in October of this year, by which time the ECB will have prepared an outreach plan, procurement standards and technology providers. More than a billion euros worth of contracts have been awarded and I cannot help but note that the budget for developing an offline solution accounts for some €662m out of contacts awarded, so clearly the priority is recognised at the highest levels. Last yeasr the Bank invited experts from across the mobile sector to expolore the business and technical aspects of deploying the digital euro’s offline functionality on embedded Secure Elements (eSE) and embedded SIMs (eSIM) in end-user devices.

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Australia’s federal government has announced plans to mandate cash acceptance for essential purchases, ensuring that businesses cannot refuse physical money for necessities such as groceries, fuel, medicines, and personal care products.

From: Older Australians demand stronger cash protections as businesses phase out physical money – Hellocare.

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President Donald Trump announced Sunday that he has instructed Treasury Secretary Scott Bessent to halt the production of pennies, citing the high cost of producing one cent.

From: Trump instructs Treasury to halt penny production | CNN Business.

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Back in July last year 

I was surprised to discover what I think future economic historians will label a weak signal for change: As of today, Target will no longer accept personal checks as a form of payment. Yes, that’s correct. Checks, along with foreign currency, mall gift cards, money orders and sundry other retail payment mechanisms are no longer valid in Target stores due what a spokesperson called “extremely low volumes” of the once popular paper payment process.

From: I Will Live To See The Last Check.

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The Order mandates that, effective September 30, 2025, the Federal government will cease issuing paper checks for all disbursements, including intragovernmental payments, benefits, vendor payments, and tax refunds… Exceptions will be made for people without banking or electronic payment access, certain emergency payments, certain law enforcement activities, and other special cases qualifying for an exception under the Order or other existing law.

From: Fact Sheet: President Donald J. Trump Modernizes Payments to and from America’s Bank Account – ].

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OpenAI is embracing rival Anthropic’s standard for connecting AI assistants to the systems where data resides.

In a post on X on Wednesday, OpenAI CEO Sam Altman said that OpenAI will add support for Anthropic’s Model Context Protocol, or MCP, across its products, including the desktop app for ChatGPT. MCP is an open source standard that helps AI models produce better, more relevant responses to certain queries.

“People love MCP and we are excited to add support across our products,” Altman said. “[It’s] available today in the Agents SDK and support for [the] ChatGPT desktop app [and] Responses API [is] coming soon!”

MCP lets models draw data from sources like business tools and software to complete tasks, as well as from content repositories and app development environments. The protocol enables developers to build two-way connections between data sources and AI-powered applications, such as chatbots.

Developers can expose data through “MCP servers” and build “MCP clients” — for instance, apps and workflows — that connect to those servers on command. In the months since Anthropic open sourced MCP, companies including Block, Apollo, Replit, Codeium, and Sourcegraph have added MCP support for their platforms.

From: OpenAI adopts rival Anthropic’s standard for connecting AI models to data | TechCrunch.

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The key dynamics of check use in America are well-known. Most checks are written by businesses, check use overall is falling, check fraud is rising. The writing has been on the wall for checks for some tme. Personally, I think that Target’s decision to stop accepting checks last year sealed their fate and now President Trump has hammered the last nail in their coffin. Well, almost.

In an executive order, President Trump has instructed the Treasury to stop issuing paper checks for all Federal disbursements inclusive of intragovernmental payments, benefits payments, vendor payments and tax refunds. The reasons given, which I am sure that we all agree with, were that checks impose costs, add delays, increase the risks of fraud, lead to theft and cause inefficiencies.

So, that’s that then. With the government not issuing checks and Target not accepting them, they will vanish from view. Well, not exactly. According to the executive order, exceptions will be made for those without access to banking or electronic payment methods, certain emergency payments and law enforcement activities.

The American Bankers’ Association broadly welcomed the move, saying that it means an opportunity to “further reduce the number of unbanked in the country from the current record low of 4%”.

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Eady noted that requiring banks to investigate and halt every suspected fraudulent transfer would create “an unacceptable burden”.

From: Santander scores victory in APP fraud retrieval case.

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I was at dinner with a friend when I got a text message from my bank in the UK confirming that I had changed my address (I hadn’t) and that I had ordered a replacement credit card (I hadn’t). Oh well, another day, another fraud. I thought I should do something immediately, but then I remembered that it was the bank’s money at risk, not mine, so I went back to finish the meal.

Later that evening, back at my hotel, I went on to my bank app and found the “contact us” button which gave me two choices: call (which I tried and got “call failed”, but anyway I was in Australia and it was 2am UK time and the “help” desk doesn’t open until 7am) or chat (which I tried, and after going through some menus about whether I wanted marine insurance or something I got a message saying the chat function is down but they were working on it). Oh well.

At night I called again, around 10am UK time, and got through to chap who told me that a replacement card had indeed been sent to Croydon. So I blocked the card and reset the correct address. No harm done.

But then I began to wonder. This is a “back up” credit card that I keep in my desk at home in case of some circumstances in which my other cards have been stolen or Amex has gone down or agents of a foreign power have blocked my Visa card, or whatever. As far as I can recall (I can’t log in to the credit card app because I forgot the password and can’t be bothered to reset it) I used it once when it arrived, just to check it was working, and have never used it since.

How did the criminals get that card number and how were they able to convince my bank to change the addeesss?