The upcoming digital version of the euro has been a widely discussed topic in recent years. The EU’s commitment to a digital euro, seen as Europe’s response to the rise of digital currencies and an attempt to modernize the monetary system, has generated both anticipation and skepticism.
As the global race to launch a central bank digital currency (CBDC) heats up, European economists are concerned about the design and intentions of the European Central Bank’s (ECB) approach to central bank digital currency (CBDC).
Questionable design choices
Many financial experts and academics who have been closely following the process have expressed concerns about whether the project will truly cater to the general public or primarily serve banking intermediaries. A recent report by University of Bern economists Cyril Monnetm and Dirk Niepelt focuses on the design flaws of the CBDC initiative.
In a comprehensive report written by Monnetm and Niepelt, the ECB critically examines the design options for a digital euro. The researchers noted:
The project’s design choices raise questions about the ECB’s goals and strategy. As a result, the digital euro may well be dead as soon as it arrives.
A key point of contention mentioned in the report concerns the design of the digital euro, which is heavily biased towards protecting intermediary banks.
Such options, including limits of a few thousand euros for consumers and even lower limits (in some cases zero) for merchants, could make CBDCs less attractive for mainstream adoption, the report said. The authors expressed concern that the ECB would view these restrictive features as permanent rather than temporary.
Intermediary Banks’ Interests: A Potential Obstacle?
The two further dissect the ECB’s public commitment to “not harm banks and protect their business models.” This intention becomes problematic when one realizes that a large portion of banks’ profits come from providing payment services.
This raises the question: Will banks actually promote digital currencies that could undercut their own revenue streams?
As the report highlights:
Unless digital euro-related banking services, such as onboarding or wallet management, prove to be more profitable, banks have no interest in seeing the digital euro flourish.
The report further reveals another potential pitfall for a digital euro — plans to implement a negative interest rate premium during periods of financial distress. Understandably, this move could make a digital euro less attractive to intermediaries, making its successful launch more challenging.
Furthermore, in a world where user experience is crucial, the so-called “sub-par” convenience of the digital euro could be a major drawback. The researchers argue that private sector solutions could eclipse the digital euro in terms of user-friendliness.
Beyond that, given the prevailing sentiment, many European citizens may have reservations about the ECB’s commitment to privacy and resistance to censorship.
Currently, the digital euro project is still in its formative stages. Although ECB officials optimistically set 2027 as the earliest possible launch date, the road to launch already seems to be fraught with problems and challenges. #数字欧元 #欧盟
