Digital transformation is the way forward, and the European Central Bank has found the key: a digital euro. In development since 2021, the planned digital euro will help accelerate the region’s shift toward more secure and convenient online payments. As with cash, the ECB envisions its digital currency as widely accessible, risk-free, and free to use. However, the path to digitizing the euro has been paved with politics and disagreements.
Politico reports Some EU governments are reportedly expressing concerns about the ECB’s regulation of a digital euro. Politico said in its report that there is an ongoing “tug of war” between several European Union governments, such as Germany and France, and the European Central Bank over the regulatory framework for the planned currency, in particular over the amount of digital currencies a citizen can hold in a supported wallet. By the central bank. Both sides fear that this could destabilize the region’s banking system if the regulatory framework is not addressed.
Digital Euro: So what is the limit?
The core of discussions about a digital euro is the amount consumers can store in wallets backed by the central bank. Some technocrats and politicians worry that if there is a higher limit, consumers could end up withdrawing huge sums of money from banks during the crisis, thus destabilizing the banking system.
Others question the necessity of capping portfolios; They say such a move could infringe on personal financial freedom and lead to a “Big Brother” scenario.
In short, current discussions about a planned digital euro revolve around one crucial issue: where does the ECB draw the line? Some observers and analysts say that a lot European Union Now countries are reacting to the European Central Bank’s wide-ranging control over the financial system. As one diplomat put it, the current debate is simply about “power.”
The ECB’s commitment to a digital euro comes at a cost
The idea of a national digital currency became popular in 2019 when Facebook failed to launch Libra, a global cryptocurrency. This failed project panicked the world and inspired more than 100 central banks to go back to the drawing board.
While many projects have not been implemented, the European Central Bank plans to create Digital euro I pushed through. As part of the European Central Bank’s plan, the digital euro could become an effective alternative to traditional payment systems. It is able to reduce the region’s dependence on payment systems outside the European Union and the United States.
Image: Positive Money
However, the ECB’s focused commitment to a digital euro comes at a cost. Some EU member states were dismayed by the central bank’s plans and actions, which they described as “technocratic.”
As such, many EU member states are taking steps to bring the ECB to the discussion table. Brussels, for example, uses political pressure to influence currency design.
Different viewpoints
Under the current draft regulations, the European Central Bank can decide how much digital money users can store in their wallets. Other officials also assert that only the central bank has the ability to control the money supply in the region.
However, at least nine EU member states have different ideas. According to a group including Germany, the Netherlands and France, they argued that Frankfurt (headquarters of the European Central Bank) should not limit other countries’ decision-making powers.
Diplomats invoked political superiority, suggesting that the planned digital euro was not just a monetary instrument but a financial service that affected every European.
Featured image from CNBC, chart from TradingView