In 1999, the European Union introduced the euro currency as part of its plan to create a unified European market. Now, in the age of digitalization, European institutions are considering the development of a digital euro, which the European Central Bank (ECB) refers to as the “next step in the advancement of our currency.” The digital euro has recently completed the investigation phase of a multi-part plan by the ECB to determine its design and technical aspects. The project has now moved on to the preparation phase, with the aim of completing it by October 2025.
Although the digital euro is still a work in progress, it has already raised concerns among some EU citizens and politicians who see it as a threat to their individual freedom. In February 2023, over 1,000 demonstrators marched in Amsterdam to express their rejection of the digital euro, citing concerns about privacy implications. Despite assurances from the European Commission that the digital euro would have the same level of privacy as cash, there is still a significant level of distrust among European citizens and politicians.
While European authorities have provided information about the digital euro, there is still speculation about its eventual design. Recent surveys show that citizens feel threatened by the potential surveillance powers that governments could gain through a digital euro, while others simply have no interest in it.
The digital euro is not just a buzzword; it is essentially a digitally transacted euro. According to Christine Lagarde, the president of the ECB, the digital euro will make the European currency “future-proof.” Fabio Panetta, the governor of the central bank of Italy, compared the digital euro to the financial revolution in Italy during the Renaissance, stating that it represents the next pivotal point in the evolution of money. However, these high-level statements may be too abstract for the average citizen, and more concrete arguments are needed to convince Europeans of the need for a digital euro.
One of the reasons Europe needs the digital euro, according to Stefan Berger, a German member of the European Parliament, is to keep up with other countries and regions that are digitizing their economies and experimenting with digital currencies. Berger believes that the popularity of cryptocurrencies has prompted central banks to develop digital currencies to remain relevant in the evolving digital financial landscape. He emphasizes the need for the digital euro to adapt to new technologies and provide new digital payment options.
Maria Demertzis, a professor at the European University Institute, highlights that the ECB wants to create a digital euro to promote financial inclusion in Europe and reduce dependence on foreign service providers. She also emphasizes the need for a digital equivalent of cash in the digital age.
However, the transition to a digital euro is complicated by Europe’s cash-heavy payment system. Despite the increase in digital payments due to the COVID-19 pandemic, cash remains the most popular payment option in Europe. As of 2023, 59% of total payments were settled with cash. Cash usage is particularly high in countries like Austria and Germany. Furthermore, some see cash as a necessity for the 5% of Europeans who are unbanked.
European authorities have protected the use of physical cash and emphasized that the digital euro will coexist alongside cash. This insistence on coexistence raises questions about the effectiveness of a digital euro. Markus Ferber, a member of the European Parliament, believes that the digital euro can only be more inclusive if it eliminates the need for a bank account. However, Berger argues that physical cash is an integral part of society and must not be at stake, regardless of the progress of digitalization.
Privacy is another concern surrounding the digital euro. People value cash payments because they allow them to preserve their privacy. Some worry that the ECB could access citizens’ financial records through a digital euro, raising concerns about potential misuse and control. While Ferber believes these concerns are unjustified, Joana Cotar, a member of the Bundestag, argues that they are valid and warrant serious consideration. She cites examples like the Canadian government freezing the bank accounts of protesting truckers to demonstrate how governments can influence financial flows.
The digital euro also aims to provide Europe with an autonomous payments infrastructure. Currently, there are various payment services in Europe that do not work throughout the entire eurozone, forcing users to rely on private non-European payment providers. The digital euro is seen as a way to offer strategic autonomy and reduce dependency on foreign service providers.
Despite the concerns and debates surrounding the digital euro, the ECB welcomes ongoing democratic debate on the topic and values feedback from European decision-makers, market participants, and potential users. The ECB emphasizes that it has no interest in people’s data or payment habits, but privacy concerns can be addressed through technology and transparency.
In conclusion, the digital euro is a complex project that raises questions about privacy, financial inclusion, and the coexistence of cash and digital money. European authorities must address these concerns and provide solid arguments to gain the trust and support of European citizens.