Belgium (Brussels Morning Newspaper) Payment service providers control the ebb and flow of finance. They are the equivalent of a beating heart. Europe’s monetary traffic is channeled almost entirely through American vessels: Mastercard, Visa, Apple Pay, Google Pay, PayPal, and the like. All of these provide access to multiple payment objects: bank deposits, direct deposits, credit cards, and even cryptocurrencies.
On its 25th anniversary, the European Central Bank (ECB) has announced a digital euro initiative as a way to wean the eurozone off this stifling dependency.
The European Commission embraced the idea with great enthusiasm and in an atypical display of alacrity it vowed to produce accommodating legislation in the forthcoming few weeks. Not to be outdone, the ECB pledged to reciprocate with a detailed design proposal latest by October.
Most payments are now electronic. This forces the hand of even the most conservative central bankers – such as the Fed – to contemplate a digital currency as the pecuniary future.
Some countries – Nigeria, the Bahamas, Jamaica, Marshall Islands – have introduced such electronic tender and China is soon to follow suit with its e-RMB (Digital Electronic Currency Payment).
But the elephants in the room are cryptocurrencies (“virtual currencies”) and other crypto-assets. Those are real threats to the money monopolies of central banks the world over. The democratization of money carries with it a veritable threat of financial chaos. The EU has moved recently to regulate this volatile speculative sector.
A digital euro would be subject to the same century-old practices and safeguards of central banking and is, therefore, likely to be a stable means of exchange and store of value.
But, stability and safety aside, the digital euro is folly. The European equivalent of nationalistic hubris. It is utterly superfluous and would only generate additional regulatory burdens and layers of bureaucracy. It is unlikely to trump other digital payment platforms either in terms of ease of use or ubiquity.
ECB President, Christine Lagarde, casts this institutional public sector foray into what should have remained strictly private commerce in terms of safeguarding the autonomy and resilience of Europe.
The typically French paranoid ideation underlying this endeavor is that European consumers, merchants, and banks may find themselves at the mercy of – largely American – payment processors. The digital euro would serve as the cavalry in such an Armageddon – though no one seems to know quite how.
Lagarde even compared Europe’s dependency on American service providers to its addiction to Russian gas and oil. Presumably, should the USA invade Belgium the way Russia invaded Ukraine, Apple and Google Pay – not to mention all the major credit cards – would cease their operations in Europe in order to secure another glorious American VE-day.
This nauseating balderdash aside, the digital euro could theoretically be stored in digital wallets on smartphones, obviating the need for bank accounts and allowing for transactions both online – via existing online banking and also a dedicated app – and offline. The issue of micropayments – tackled so elegantly by the likes of Apple Pay – is conveniently ignored.
To unseat the current payment services outfits, the digital euro would need to be as frictionless and as fee-free as the EFT system of bank transfers. Even then, it would be competing with the likes of Germany’s vanishingly low-cost Girocard system.
A digital euro should also offer access to multiple payment objects, such as retail and investment bank deposits, direct deposits with the ECB, other payment platforms, cryptoassets, and credit cards.
The main impact of a digital euro – should it be introduced following a testing period of three years and should it miraculously become a “big thing” – would be to undermine the European banking system.
Digital currencies are a form of savings, not only of cash. They compete head on with bank deposits as well as current accounts. The only way to avoid a major disruption is to place a strict quota on the amount of digital currency per user, rendering it utterly useless.
Another problem is the harmonization – and, probably, the elimination – of national digital currency schemes in several eurozone countries such as Netherlands and Belgium.
The ECB should prioritize way more urgent matters, such as inflation and trade finance flows with China. The retail digital euro smacks of political theatre and makes little economic or financial sense.
Opinions expressed in the op-ed section are solely those of the individual author and do not represent the official stance of our newspaper. We believe in providing a platform for a wide range of voices and perspectives, even those that may challenge or differ from our own. As always, we remain committed to providing our readers with high-quality, fair, and balanced journalism. Thank you for your continued support.Sincerely, The Brussels Morning Team
