The EU strategy is meant to address the striking lack of a cross-eurozone retail payment system, thus freeing the currency union from its dependency on U.S. payments providers such as Visa and Mastercard. It says that it should provide the private sector with an architecture that can be adapted to meet the demands of businesses and households.
But Europe, like the U.S., also has an ulterior motive. The arguments for a digital euro are “far more geopolitical … than improving payment services,” Rod Garratt, an economics professor at the University of California, Santa Barbara, told POLITICO. “If there’s some type of war or political disruption, [the view is] we have to have control over our infrastructures.”
Other central banks from Canada to Switzerland and the U.K. have all cooled on the idea of a CBDC after doing their own homework, but the eurozone is, as ever, a special case due to the unique nature of Europe’s currency union. A digital euro would provide European depositors with a trusted anchor in a potential panic if the credit of eurozone banks — or governments — ever came into question again.
According to Rosa, many European banks, initially hostile to the project and afraid it would reduce their role in the financial system, have come to see ECB-led digital money as the lesser evil. The choice, he said, was between having their lunch eaten by U.S.-issued stablecoins or by the digital euro.
Yet others see an opportunity in competing with dollar stablecoins directly by issuing euro-denominated versions, not least because the digital euro is still years away and is limited to smaller payments, not suitable for corporates.
“If we as Europeans don’t come up with a viable solution, then ultimately we will have to accept a U.S. or Chinese solution,” said Alexander Hoptner, CEO of Frankfurt-based AllUnity, which recently received approval from German regulator Bafin to issue its first euro-denominated stablecoin. Allunity, which is backed by Deutsche Bank’s asset management subsidiary DWS, already has 12 banks in the onboarding process, including some large ones, he said.