Digitalization is the best way forward, and the European Central Bank has found the important thing: a digital Euro. In development since 2021, the planned digital Euro will help fast-track the region’s shift towards safer and more convenient online payments. Like money, the ECB envisions its digital currency as widely accessible, risk-free, and free to make use of. Nevertheless, the road to Euro’s digitalization has been paved with politics and controversies.

Politico reports that some European Union governments are reportedly expressing concerns over the ECB’s regulation of the digital Euro. In its report, Politico said there’s an ongoing “tug-of-war” between several EU governments, like Germany and France, and the ECB over the planned coin’s regulatory framework, particularly on how much digital currencies a citizen can hold in a wallet backed by the central bank. Each side fear that it will possibly destabilize the region’s banking system if the regulatory framework isn’t addressed.

Digital Euro: So What’s The Limit?

The center of the digital Euro debates is the quantity consumers can store in wallets backed by the central bank. Some technocrats and politicians worry that if there’s a better limit, consumers may find yourself pulling huge sums of cash from banks during a crisis, thus disrupting the steadiness of the banking system.

Others query the necessity for a cap on the wallets; they are saying such a move may violate personal financial freedom and provides rise to a “Big Brother” scenario.

Briefly, the present debates across the planned digital Euro choose one crucial issue: where does the ECB draw the road? Some observers and analysts say that many EU countries are actually reacting to the ECB’s extensive control over the economic system. Within the words of 1 diplomat, the present debate is just about “power.”

ECB’s Commitment To Digital Euro Comes At A Cost

The concept of a national digital currency became famous in 2019 when Facebook did not launch Libra, a worldwide cryptocurrency. The failed project spooked the world and inspired over 100 central banks to return to the drafting board.

While many projects didn’t push through, the ECB’s plan to create a digital Euro pushed through. As a part of the ECB’s plan, the digital Euro can grow to be an efficient alternative to traditional payment systems. They will cut the region’s dependence on non-EU and US payment systems.

Image: Positive Money

Nevertheless, the ECB’s laser-focused commitment to a digital Euro comes at a value. Some EU-member countries were spooked by the central bank’s plans and actions, which they describe as “technocratic.”

As such, many EU member countries are taking steps to bring the ECB to the discussion table. Brussels, for instance, uses political pressure to influence the currency’s design.

Differing Views

Under the present draft regulations, the ECB can resolve how much digital funds users can store of their wallets. Other officials also confirm that only the central bank has the ability to regulate the region’s money supply.

Nevertheless, not less than nine EU member countries have different ideas. In line with a bunch that features Germany, the Netherlands, and France, they argued that Frankfurt (ECB’s headquarters) mustn’t limit the decision-making powers of other countries.

Diplomats invoked political supremacy, stating that the planned digital Euro isn’t only a monetary tool but a financial service that impacts every European.

Featured image from CNBC, chart from TradingView