Is The Digital Euro A Sell Out to Banks?
Yes it is, but not just to banks but to the EU government.
So is the digital euro a sell-out to banks? The answer is complicated, but in short, yes!
This great read from the Veblen Institute and Positive Money criticizes the European Central Bank’s digital euro and says clearly that it is “heeding to the banking lobby.”
They are correct—the digital euro does heed or “sell out” to the banking lobby! But the question is why?
It isn’t just because the banking lobby is undeniably powerful but also because there is only so much disruption that the European Central Bank (ECB) can reasonably expect to get through an EU government hell-bent on monitoring your money.
👉TAKEAWAYS
Veblen’s “must haves” for the Digital euro:
Be universally accessible. People should be able to access digital euros through a diverse range of intermediaries, which include non-profit and public entities. Implementing a tiered identification system for account-based digital euros, and introducing a value-based option, would ensure the availability of digital euros to the most vulnerable segments of society.
✅ I couldn’t agree more, and the ECB needs to expand its payment service providers (PSP) list to include a oath for non-traditional financial players.
Be free of cost for users. Any future legislative framework on the digital euro should include a list of basic services that should be provided for free to users, such as opening and managing an account and the provision of a payment instrument (e.g. a card).
✅ In short, YES! I couldn’t agree more and think that the ECB’s copying credit card merchant fees is a slippery slope. So, how do you pay for a CBDC? I think the ECB should have copied Alipay and WeChat Pay with a minuscule fee on bank-to-wallet transfers you could even cap it at Euro 0.02 max!
Offer a high level of privacy and data protection. Cash, which is fully anonymous, should be used as the baseline when developing the digital euro. A value-based option should be introduced alongside an account-based one, and it should be designed to be fully anonymous. For the account-based option, a ‘privacy threshold’ can ensure that users’ data for small transactions is protected.
❌ Data protection and privacy are key, everyone agrees on this. The problem is that like it or not if we go with 100% anonymity on all transactions the state’s tax revenue will drop to zero and CBDC use on drug and other nefarious transactions will be rampant. In the end, we need a compromise, and the best so far is providing privacy and anonymity on low-value transactions.
Have a clear European Central Bank branding. Clear branding will help to differentiate public digital euros from private bank deposits.
✅ This is the easy part. Yes, the digital euro already has branding that shows it as a national digital currency, not the proprietary currency of banks. I think this part is pretty clear by now.
Bring resilience to the payment system. By providing an offline value-based option, and by ensuring that the digital euro’s legal and technical core infrastructure is public and works independently of any private system, we can offer an alternative to existing payment rails and increase resiliency in case of outages.
✅ Agree that offline transfers are critical to resilience. The ECB has made them a priority in more recent publications and backed off calling them “optional,” as it did in earlier documents.
👊STRAIGHT TALK👊
The ECB is trying to transform the monetary system without disrupting the banks that it is beholden to and has had to cede ground to do it. There are no ifs or buts about it.
Did the ECB sell out? Yes, but they didn’t have a choice. I want the digital money proposed in the paper, but it goes so far beyond what we have now for money that it wouldn’t just be the banks who oppose it but the government itself.
The proposed money goes so far that it would be politically impossible to get it through an EU government that is hell-bent on knowing where your money is. Tax, anti-terrorism, and money laundering are foundational to government control of money.
The ECB is pursuing the best deal possible to ensure that banks don’t openly revolt, a deal killer, and that existing cash controls are respected.
They are pushing for as much transformation as the system can take without making the digital euro dead on arrival.
I respect the ECB’s compromises to the banking lobby and government even if I don’t like them because I want a flawed digital euro more than holding out for perfection that will not be attained!
The ECB knows perfect is the enemy of good.
Readers like you make my work possible! Subscribing is free andI operate by what is called the “PBS model.” Like public broadcasting, everything I write is free, but if you like the content, please buy me a coffee by subscribing. Thank you!
Sponsor Cashless and reach a targeted audience of over 50,000 fintech and CBDC aficionados who would love to know more about what you do!
