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The digital euro, a central bank digital currency (CBDC) being developed by the European Central Bank (ECB), aims to revolutionize Europe’s digital payment landscape. However, while the ECB has marketed it as a convenient, free, anonymous, and reliable alternative to existing cashless options like credit cards and mobile payment apps, the true purpose of the digital euro goes beyond these simplified claims.

Key Aspects of the Digital Euro

• Direct Issuance by the ECB: Unlike traditional digital payments that rely on intermediaries like banks or payment service providers, the digital euro is issued directly by the European Central Bank. This allows for peer-to-peer transactions without the need for third-party banks or payment gateways. It can be used for offline transactions, which is a major technical innovation that sets it apart from other digital currencies.
• A Digital Version of Cash: The digital euro is essentially a digital version of legal tender (cash), providing an alternative to cash in a world increasingly dominated by digital payments. Its key feature is direct payment between users, bypassing the traditional banking system. It aims to offer the same advantages as cash, such as anonymity, but with the convenience of digital transactions.
• Cost Reduction and Micro-Payments: The digital euro promises to lower transaction costs, especially for micro-payments that are currently prohibitively expensive using conventional bank transfers or digital services like PayPal. This cost efficiency is intended to enable new business models by lowering the friction in digital transactions, thus encouraging innovation in commerce.

The ECB’s Claims vs. the Real Motivation

While the ECB portrays the digital euro as a means to make payments easier, faster, and more secure, there is an underlying political and economic agenda that goes beyond improving consumer convenience.

• Sovereignty and Competition: One of the main drivers behind the digital euro is Europe’s desire to assert its digital sovereignty. The ECB positions the digital euro as a tool to strengthen the euro’s competitiveness against non-European payment providers, particularly those from the United States like PayPal, Apple Pay, and Google Pay. The EU is concerned that foreign companies may dominate the digital payment landscape, thereby reducing Europe's ability to control its own financial systems.
  • This is a defensive measure to protect European financial interests. By creating a state-backed alternative to privately controlled digital payment systems, the EU aims to ensure that Europe does not become reliant on foreign corporations for essential services.
• Not About Citizens’ Convenience Alone: While the ECB frames the digital euro as a user-friendly solution for consumers, the real concern is about the control over digital currency. The digital euro offers a more centralized alternative compared to the decentralized nature of cryptocurrencies like Bitcoin. The ECB aims to harness the power of the state in regulating and controlling digital transactions, thus consolidating private property and ensuring the smooth functioning of Europe’s monetary policies.
• A Tool for Strengthening the Euro: The digital euro is also seen as part of Europe’s broader ambition to establish the euro as a dominant global currency. As the first fully-regulated digital currency issued by a central bank, it could position the euro to compete against other digital currencies, including the digital yuan or the U.S. dollar. The EU sees the digital euro as a way to expand its geopolitical influence by promoting its own currency as a global standard for digital payments.