Among supporters of cryptocurrencies, few are in favor of central bank digital currencies, also called CBDCs. Their argument? A philosophy at odds with the original spirit of Bitcoin, precisely designed to protect against the arbitrary decisions of States and banks. However, the digital euro is a question of sovereignty for Europe, which must face the giants of online payments. Explanations.
1) Decline free cash in electronic version
Today, cash is managed directly by the ECB: it is a public service which is free for the user. Design, printing, transport, the European Central Bank takes care of everything. Of course, this system is not without cost. But it ensures everyone a free way to perform daily transactions. And even if in France, cash payment remains capped at 1000 euros, it remains the most inclusive transactional tool. Who would have the idea of entrusting the management of coins and notes to commercial banks? Yet this is exactly what is happening today with electronic transactions.
2) Promote financial inclusion
Cash was used for 59% of point-of-sale transactions in 2022, compared to 72% in 2019. It’s a fact: more and more transactions are carried out by bank card. However, this money is no longer there central bank currency. It circulates in “scriptural” form (figures entered on the accounts). In fact, a shortcut has been taken by commercial banks: account registers now serve directly as a means of daily payment. Whereas previously they were reserved only for transfers and transfers between accounts.
It is therefore a question of payment sovereignty which arises in particular for Europe. Because this payments industry could reach the 2.900 billion in 2030. The digital euro could thus promote financial inclusion, by guaranteeing access to free electronic cash. An ambition that we find in a recent report from the ECB, which indicates that this new form of euro will be “ inclusive by design“.
3) Preserve European sovereignty over payments
The growth in bank card transactions benefits American giants such as Visa and Mastercard. These companies capture part of the value exchanged, up to 2%: this is the amount that can be taken from traders. Therefore, should we boycott these solutions and simply throw your bank card in the trash, as some recommend? Another path seems possible: that of a public digital currency, equivalent to that of private actors.
For the EU, it would be too risky to let this industry gradually eat away at what makes up its DNA: its currency. Especially since this flight of monetary power towards private actors is not necessarily in favor of the collective interest. Thus, the digital euro would allow everyone to have direct access to central bank money digitally, whereas today it is only available in “paper” format, through banknotes and coins.
4) Strengthen the link between citizens and their central bank
Like notes and coins, the digital euro would be a public good, meaning everyone in the eurozone could pay in digital euros without fees. This free service is a strong argument and an essential asset in the European CBDC project.
Moreover, money is not just a simple means of payment. She is a vector of social bond and symbolic values. The European Union thus wishes to strengthen citizens’ belonging to its values, by providing them with innovative solutions. And at the same time, breathe new life into a currency that is still very young.
5) The digital euro, a promise of security
The EU also promises “stronger” guarantees. Indeed, a central bank, unlike a commercial bank, cannot go bankrupt. Why savers should be exposed to the risks taken by these banksexposed to markets that can collapse, as during the financial crisis. subprime ?
Moreover, security of electronic transactions is now entirely ensured by these banking providers. They are the ones who must deploy complex solutions to fight against fraud and scams. But these measures are not flawless, and losses remain considerable. We thus estimate 464 million euros the amount of bank card fraud for the year 2022 alone, in France. The ECB would like to ensure part of this digital payment security, by developing your own expertiseonce again gaining sovereignty.
In addition, the digital euro is not currently based on any “blockchain” concept, as it may have been initially presented. But it nevertheless aims to compete with cryptocurrencies, seen as the first attempt to make cash “digital”. But these crypto-assets as the Bank of France prefers to call it, are considered far too volatile. Above all, they still largely escape attempts at regulation by public authorities.
6) Slow down wear
A great innovation of the digital euro – which the cash euro does not allow – is the concept of programmability of money. CBDCs could thus introduce mechanisms that penalize those who do not spend their money. This, in order to prevent hoarding, that is to say the fact of keeping the money and profiting from it via interest. Some bitcoiners will surely see this as a threat. However, it is also a concept that could correct the excesses of the current monetary system. Former trader Anice Lajnef points out that the current financial system creates inequalities by imposing different interest rates on the rich and the poor. An injustice which mechanically reinforces social disparities.
However, if we program money so that there is an incentive to spend it instead of storing it, that would be a major change. This is also what is experienced via some local currencies. This is the case of Sol Violette which loses 2% of its value each quarter, encouraging users to quickly spend their tickets. The digital euro would be an interesting tool, unlike the fans of deflation, which has its own problems. Actually, several currencies with several different philosophies can very well co-exist : debt currencies, deflationary currencies like bitcoin or programmable currencies like the digital euro.
7) The digital euro, a complement to cash (and bitcoin)
Does the announced arrival of the digital euro really threaten the existence of cash? In truth, cash is still very strong and remains widely used across Europe. Indeed, the digital euro is not intended to replace all other current means of transactions. Jeanne Lazarus, sociologist of money, recalls that “all currencies are destined to coexist, whether material or electronic. The digital euro will not mark the end of cash”. So, despite legitimate fears, cash should not disappear. History shows us: coins, bank notes, credit cards, smartphones… all these means of payment add up without canceling each other out.
The idea of the digital euro is therefore to have the choice. The choice between cash, bank cards, even cryptocurrencies, with a CBDC which will offer new possibilities. Today, the line is clear: “Cash or digital, your choice”as Christine Lagarde regularly insists.
Concerning anonymity, the ECB writes that this digital currency must be a privacy by design. Should these statements be taken as cash ? A legitimate distrust still seems appropriate. Especially since in the long term, anything can happen. For example, we can imagine that using the digital euro would give rise to advantages. Or rather, that not using it would put the user at a disadvantage…
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