As China continues to develop its digital Renminbi in a move to gain global financial dominance, Europe is now recognizing the need to keep up.

In a speech published today, ECB executive board member Benoît Cœuré said that there is a lack of European solutions for online payments, leading to a reliance on non-European solutions. To solve this, he argued, Europe needs to innovate with either a central bank digital currency or an alternative digital payments strategy.

“Dependence on non-European global players creates a risk that the European payments market will not be fit to support our Single Market and single currency, making it more susceptible to external disruption such as cyber threats, and that service providers with global market power will not necessarily act in the best interest of European stakeholders,” he said.

Stablecoins are one alternative. These are cryptocurrencies that are pegged to the prices of fiat currencies, such as the US dollar. However, he warned against the idea, because they “raise potential risks across a broad range of policy domains, such as legal certainty, investor protection, financial stability and compliance with anti-money laundering requirements.”

Instead, Cœuré said that Europe needs its own scheme, whether blockchain-based or otherwise.

“The only effective response to these risks is for European stakeholders to step up their collaboration and act together to provide payment solutions that both reflect the demands of consumers and strengthen the Single Market,” he said.

Cœuré pointed out that the ECB and other central banks are investigating the idea of creating a central bank digital currency. He said, “For example, a central bank digital currency could ensure that citizens remain able to use central bank money even if cash is eventually no longer used.”

But, he acknowledged that developments in this area should not rule out alternative market-led solutions, if they can deliver a sufficient payment solution. Yet it needs to make a decision fast, or China will continue to lead the pace of innovation.