By George Ward
The European Union (EU) ‘s quest to develop a digital Euro for the bloc has generated controversy and doubts from a section of its member countries. Advocates of the digital Euro are at odds with opponents of the Central Bank digital currency (CBDC), leaving even the most technologically savvy central bankers needing clarification on the project’s next phase.
Within the EU, proponents have presented several compelling reasons to support the creation of a digital Euro pegged to the value of the fiat currency. They highlight its seamless usability across the bloc, unmatched privacy compared to alternative digital payment methods, and the assurance of the union’s independence from institutional payment service providers.
Meanwhile, the EU’s central banks, already conditioned to rely on technical and economic logic, now face various challenges regarding this CBDC project. Some of their challenges include providing convincing explanations regarding concerns about privacy and the possibility of a government that skeptics believe sees the CBDCs as a tool to further its state dominance.
Across the Atlantic, an anti-CBDC sentiment is gaining traction. Two US presidential hopefuls have expressed concerns, Robert F. Kennedy Junior and Ron DeSantis. Both consider state-backed digital currencies as tools for extensive surveillance and societal manipulation.
Meanwhile, prominent figures in the EU, like the Netherlands’ Marcel de Graaff, have expressed similar concerns. De Graaf opined that a digital Euro would give the government unrestricted access to individuals’ transaction histories, restrict purchases, or even enforce a social credit system.
Central Banks’ Confusion
The growing criticism makes defending the CBDC initiative difficult, confusing central banks about the proper response to the rising speculations. Apart from this challenge, some staunch opponents see the introduction of a digital currency, whether in the eurozone or elsewhere, as part of a grand scheme to exert global control over individuals and their finances.
On the other hand, the viewpoint, as expressed by the Belgian Central Bank Governor Pierre Wunsch, emphasizes that the discourse surrounding CBDCs goes beyond pure logic. He reiterates the importance of ensuring that authorities enlighten the general public that the project is not about asserting control over their lives.
Even though this doesn’t require any explanation, it has become vital since many individuals have different perspectives.
The Austrian Central Bank Governor Robert Holzmann also noted that the issue with the CBDC initiative is that there hasn’t been any positive enlightenment about it since its inception.
He added that there needs to be a convincing story to sell the idea behind the digital Euro to the people. According to Holzmann, this will align with the famous saying that money is for the public good.
The Austrian Central Bank Governor further said there is a need for the EU bloc to rise to the occasion, given the threats from other jurisdictions and private financial service providers.
Transparency Concerns
Also, Evelien Witlox, the European Central Bank’s (ECB) program manager for the digital Euro, acknowledged the growing concern about CBDC becoming a subject of cultural debate. She stated that the ECB is worried and that there are genuine concerns expressed by members of the organization, which the organization will address soon.
However, Witlox admitted that the difficulty is determining the best approach. The executive explained that there are key system features that prevent the ECB from accessing private individual data or controlling how individuals can spend their funds.
She further said that credibility is another challenge the organization is facing. Witlox noted that the next step is to figure out how to persuade people that the ECB is telling the truth.
Nevertheless, central bank officials are considered intelligent economists rather than marketing experts, and technical explanations may only address a portion of the problem. Meanwhile, Erik Luts, the chief innovation officer at Belgian bank KBC, opined that people must have faith in the CBDC project for it to gain broader acceptance.