The European Central Bank (ECB) is currently working on the introduction of the digital euro as an electronic means of payment, which should be made available to all residents of the euro area, including Spain. This is part of a global trend with central banks working on their own digital currencies, dubbed Central Bank Digital Currency (CBDC). To track the progress of this effort, visit https://cbdctracker.org.

The ECB has been working on the development of the digital euro since October 2021 and is testing its practical applicability together with the national central banks of the euro area. In a press release dated September 16, 2022, the ECB announced that it is working with five external companies to test the technological feasibility of the digital euro for this purpose.

CBDC (digital central bank money) as well as the digital euro can be divided into retail and wholesale CBDC. Wholesale CBDC are limited to financial institutions and commercial banks, and serve the interbank market. The Banco de España (BDE), the central bank of Spain, has announced that it will conduct initial experiments with its own wholesale CBDC. To this end, she has obtained offers of cooperation from local financial and technology companies and set the application period until January 31, 2023.

Retail CBDCs, on the other hand, are open to the general public. The digital euro, for example, can be transferred directly between parties (peer-to-peer) and is therefore very similar to cash. Alternatively, it can also be made accessible via accounts with the central bank (account-based CBDC), similar to a bank deposit.

Although citizens in the EU already have various cashless payment options, such as credit cards, smartphones, smartwatches, PayPal or the payment app Bizum in Spain, the EU is still planning to introduce the digital euro. According to the ECB’s website, the digital euro should be usable throughout the euro area and be “as secure and user-friendly as cash is today“. Unlike commercial banks, which can fail, the citizen would be entitled to the central bank as a safe intermediary. However, amounts of up to EUR 100,000 per customer and bank are already protected by the statutory deposit insurance. This means that the central bank would only be a safer place for their money for customers with assets of more than EUR 100,000.

In order not to destabilize the banking system, Fabio Panetta, a member of the ECB Executive Board, proposes an upper limit for the digital central bank euro in an interview with the Financial Times. One possibility would be that each citizen can hold a maximum of 3,000 euros in CBDC money, any money in excess of this would have to be transferred to a bank account. Another possibility would be that you can hold as much CBDC money as you want, but above a certain threshold you become financially disadvantaged. Credits of more than 3,000 euros could then be made unattractive by penalty interest. The reasons for the introduction of the digital euro are also stated on the ECB website.

The term “Industry 4.0” is often mentioned in connection with digitization, especially in Spain. It is about the complete digitization of industry with the aim of connecting the real world with the virtual one. Intelligent devices and machines will be able to communicate with each other autonomously, which is referred to as “machine-to-machine communication” (M2M). Some examples of this technology are cars that automatically pay after filling up and refrigerators that can reorder goods when stocks are low. In addition, standing orders, interest and leasing payments could be processed automatically. The digital euro could also be used for payments between the state and individuals, such as paying social benefits or paying taxes, as proposed by the ECB.

In the context of Industry 4.0, the digital euro can be used as a means of payment, as Bundesbank board member Burkhard Balz emphasized in Wirtschaftswoche. He envisions that the digital euro could be designed to support programmable payments in a highly automated environment. However, this possibility will probably not be available immediately when the digital euro is introduced.

There are both supporters and critics of CBDCs, such as British financial author Dominic Frisby. In an article for the investment magazine “Money Week” in April 2021, Frisby wrote: “Programmable money – CBDCs – means that you, the user, have even less control over your money.” Pretty much anything can be encoded into a CBDC. For example, China is considering expiry dates in their CBDCs. “You have to spend the money by a certain date or it expires.” Whistleblower and IT security expert Edward Snowden put it even more bluntly. On his blog he wrote that CBDCs are not an innovation, but “crypto-fascist currencies” that are used to do so served to deny their users “basic ownership of their money and use the state as the intermediary of every transaction”.

Unlike cash, CBDCs will not be completely anonymous. Agustín Carstens, general manager of the Bank for International Settlements (BIS), explained during an IMF panel discussion on cross-border payments in 2020 that when it comes to CBDCs, the central bank has absolute control over the rules and regulations. Christine Lagarde, head of the ECB, made a similar statement at the Digital Euro Conference in Brussels in November 2022, stressing that “full anonymity, such as that offered by cash, is not a viable option“.

Cecilia Skingsley, head of the Innovation Hub at the Bank for International Settlements (BIS), believes that the introduction of a CBDC is not a “one size fits all” solution and should be implemented in conjunction with identification measures. A possible component could be a digital wallet. The European Union (EU) is currently working on various identity projects, including the Nobid consortium, which deals with “EU digital wallet payments”.

The EUDI Wallet Consortium (EWC) is conducting pilot projects to test the EU Digital Identity Wallet (EUDI) ecosystem. According to the eIDAS 2.0 regulation, from January 1, 2023, all EU member states must provide their citizens with a certified digital wallet (European Digital Identity Wallet) within a maximum of twelve months, including Spain from 2024. The wallet must be specified by the EU Meet standards, however, there will not be a single European wallet, each country can create its own.

The EU has taken various measures to promote the spread of the European Digital Identity Wallet. This includes requiring various sectors such as banking, finance, healthcare, education, transportation and utilities to use the wallet. Even big tech companies like Amazon, Google, and Facebook need to roll out the wallet to prevent social login identification. The wallet is expected to offer features such as authentication for services, identification to third parties, notarization of attributes such as address, age, marital status, financial and company details, as well as vaccination and test certificates, and document signing.

From my point of view, you don’t have to be a conspiracy theorist to realize that the digital euro and the digital ID (which will also become mandatory) are by no means about simplifying processes. It is simply monitoring all payment transactions in the EU and beyond. And these should not only be recorded, but also be able to be assigned to the individual in a very personal and targeted manner. How this fits together with the otherwise so high level of data protection in the EU is not clear to me. The digital euro is currently still mentioned as a supplement to cash, but I don’t think you have to be a clairvoyant to see where the journey is going. Sooner or later, the digital euro should completely replace cash.

What surprised me the most here is that even the initiators no longer cited the usual suspects such as combating terrorism or combating money laundering as reasons for the digital euro. Even if it certainly won’t go all the way straight away, and there will also be many transitional periods, as well as individual regulations for the individual countries within the EU (if it were uniform, if it weren’t for the EU), the path has been mapped out for a long time, and should now be taken with great strides.

I think that the will of the majority of citizens in the EU is being governed here, and that an ideology is being imposed instead. As is the case with other projects that are openly talked about, and also with those that one would prefer to remain silent about. In the end, the citizens of the European Union only have the opportunity to express the will of the majority through democratic elections in order not to succumb to the will of the few. And then we will see what the majority of people in Europe want. As I said before, this is just my personal opinion, and I’m sure everyone may see it differently. But I don’t think I’m all alone with my view of things here.