Scepticism about digital euro will be hard to overcome
Digital currencies are a tricky subject to broach. As with smart meters – and a growing list of other things frankly – legitimate criticisms of the idea are swamped by conspiracy theories, with the end result being that the temptation to just switch off and say nothing is almost overwhelming. Add in the shrieking from cryptocurrency boosters, some of whom seem to think that Central Bank Digital Currencies (CBDCs) are a plot to steal their lunch, and the prospect of writing anything on the subject becomes doubly unappealing.
Nevertheless, CBDCs are an idea that should be taken seriously. Certainly central bankers do so. For its part, the European Central Bank (ECB) has said a digital euro makes sense as it would allow people to pay electronically but in a way equivalent to cash. The Central Bank of Ireland takes a similar view. In 2021 the bank’s governor, Gabriel Makhlouf, wrote that digital currencies were “not a question of ‘if’ but rather ‘how and when’”.
In 2021, the ECB launched a project to investigate the feasibility of a digital euro. If one is greenlit next year, when a decision is due, it could be in customer’s digital wallets by 2028.
Today (6 September) the Central Bank and ECB will attend a panel on the digital euro as part of a forum hosted by Financial Services Ireland (FSI), part of the employers lobby group Ibec. Speaking to bankers, financial services professionals and payments providers, though, will be the least difficult part of proposing a digital euro.
On the whole, Europeans themselves seem to have what could be described as mixed views on the idea.
Alternatives
A household survey conducted in 2021 by Germany’s central bank, Deutsche Bundesbank, found that more than 60% of respondents say a digital euro as a good alternative to cash. At the same time, more than 70% said payment methods already available are sufficient and 60% said it seemed like a first step towards abolishing cash. Closer to home, a 2023 report from consultancy BearingPoint found Irish consumers were among least informed about a possible digital euro.
The European Parliament’s Economic Affairs Committee has also expressed concern, with contributions from across the political spectrum. Markus Ferber of Bavirias’s centre-right Christian Social Union party, for instance, worried about the cost of implementing a digital currency.
Notably, Social Democrat MEP Joachim Schuster questioned the purpose of the digital euro: “It’s not very clear to me what the benefits would be to the citizens,” he said.
This is precisely the point. Those who argue for digital cash have, thus far, failed to make the argument.
But sceptical consumers and politicians are not the only ones arguing against a headlong rush to digital money. Michael Kavanagh, chief executive of the Compliance Institute said, having polled compliance experts, the ECB has much work to do if it is to allay fears around digital cash.
“The thinking behind the digital euro is that it would give consumers the option to use central bank money in a digital format, complementing banknotes and coins – however, our survey found that there are concerns that the rollout of the currency could in time lead to less availability of cash. Interestingly, almost half (47%) of those surveyed were worried that the digital euro could give more power to tech and fintech companies,” he said in a statement to the press.
The survey also found that 63% of compliance experts in the financial sector don’t believe there is a need for a digital euro. Just 6% of respondents said they had no concerns about the digital euro.
A digital euro is not a bad idea, per se, and certainly worth considering as long as cash remains not only available but usable. Being able to hold euros in something other than cash could be useful, and the ability to make frictionless and no-cost transactions across the eurozone would certainly be welcome.
However, cost-free transactions could also be facilitated by the euro as it is, so long as legislation stopped fees from being applied to banal and commonplace transactions. Seen in this light, we already have a digital euro. It’s called the euro.
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