Over the past 10 years, the Euro has seen a significant decline in usage on the SWIFT network, leading to speculations about its currency status and implications for the financial world.
Not too long ago, the Euro was seen as a rising challenger to the US Dollar, but the past decade has witnessed a dramatic shift. The Euro’s usage on the SWIFT network, a global financial messaging system crucial to international money and security transfers, has plummeted. This reliance on digital transactions and the declining use of the Euro raise important questions about its future as a global currency.
The Decline of the Euro on SWIFT
The Euro’s decline on SWIFT is not a recent phenomenon. Over the past decade, its usage has continuously plummeted. From posting approximately 50% of the messaging traffic on SWIFT back in 2010, the Euro has slipped to just 34.5% in 2020.
This decline can be attributed to several factors. The financial crisis that hit the Eurozone severely impacted the credibility of the Euro. The aftermath of the crisis led to austerity measures and rigorous fiscal policies, eventually slowing down economic growth and reducing the demand for the Euro.
How Does This Impact Global Finance?
As one of the world’s leading currencies, the decline of the Euro on SWIFT has significant implications for global finance. It not only affects the status of the Euro but also creates room for other currencies like the Chinese yuan to gain ground.
In terms of practical impacts, the declining use of the Euro could lead to higher transaction costs. This is because the reduced presence of the Euro on SWIFT could lead to a lack of liquidity, thereby raising transaction costs for businesses and individuals who use the Euro for international transactions.
Is Digital Currency the Future?
The dwindling usage of the Euro on SWIFT raises another question – Is digital currency, like Bitcoin or even a potential digital Euro, the future of global finance?
There’s no denying that cryptocurrencies have been making waves in the financial world. The decentralization, transparency, and security offered by digital currencies make them an attractive alternative to traditional currencies. However, issues such as regulatory uncertainty, price volatility, and security risks are still major obstacles to their widespread adoption.
On the other hand, the idea of a digital Euro is being explored by the European Central Bank (ECB). While the ECB’s digital Euro would still be a centralised currency, it could offer the benefits of digital currencies while avoiding some of their disadvantages.
While it’s still unclear what the future holds for the Euro and digital currencies, one thing is clear – the financial world is constantly evolving, and it’s important to stay informed and adapt to these changes.
