European Central Bank Faces Skepticism Over Digital Euro Plans

The European Central Bank's (ECB) consideration of issuing euros in digital form has faced scepticism and criticism from some members of the European Parliament. During a hearing at the European Parliament, lawmakers expressed concerns and called for the rejection of the plans for a digital euro. The debate revolves around privacy, regulatory rules, and the potential impact on the banking sector.

Miguel Fernández Ordóñez, a former Spanish finance minister and central bank governor, argued in favour of the digital euro, suggesting that it could eliminate the problem of banking crises. He asserted that bank deposits are not money but promises to pay cash, and the digital euro could serve as a safe asset.

However, opponents raised concerns about state intervention in the market economy and the potential for the digital euro to become a risk-free alternative for holding money, undermining commercial deposits that support bank lending. Some lawmakers questioned the practicality and usability of the digital euro, particularly if users have to set up multiple accounts to avoid breaching holding limits.

While the ECB has been exploring the technology behind a digital euro to keep pace with the digital age, the scepticism expressed during the parliamentary hearing reflects the challenges and debates surrounding the adoption of central bank digital currencies (CBDCs) globally. Lawmakers are deliberating on legislation that will set rules, including those related to privacy, for the potential issuance of a digital euro.

Stefan Berger, the German lawmaker responsible for drafting the parliament's position on the law, expressed a commitment to pursuing the digital euro, emphasizing the need for the European Parliament to make it clear that they want a digital euro. However, the critical arguments raised by colleagues will be part of the ongoing discussions as the issue progresses.

The debate over CBDCs, including the digital euro, highlights the complex considerations and differing perspectives within the policymaking arena, where the desire for innovation and technological progress must be balanced with concerns about market dynamics, privacy, and the potential impact on traditional financial systems.