The dark side of CBDC: How digital euro threatens citizens

Traders Union
All News
Crypto
How digital euro threatens citizens

From interest to research

In 2020, the ECB began exploring the possibility of creating a digital euro—a European version of CBDC (Central Bank Digital Currency).

CBDC is a digital form of a national currency issued and controlled by a central bank. It is designed for use as official legal tender and as a complement to cash.

Interest quickly turned into full-fledged research. By 2021, the ECB was examining the technical, regulatory, and economic aspects of CBDC implementation amid the growing popularity of cryptocurrencies and the digitalization of the global economy.

At that time, the central bank focused on basics: design, technology testing, and consultations with stakeholders, including banks, tech companies, and citizens.

Project implementation begins

In 2023, the ECB moved from theory to practice. In October, it officially announced the start of the preparatory phase for the digital euro, set to last until May 2025.

The regulator launched a competition for innovative companies and experts to advance the digital euro project. Banks, financial companies, research institutions, and technical experts were invited to test the digital euro interface and its payment systems.

Current status

Yesterday, the ECB released a new report on the progress of the digital euro, revealing that it has completed accepting applications from external service providers and launched a tender for the practical implementation of CBDC.

Loading...

The tweet was deleted by the author.

But we saved everything 🙂.

The regulator claims it has laid the foundation for the potential issuance of CBDC while conducting new studies on user preferences regarding digital assets. Parallel work with institutions within the European System of Central Banks will continue, including developing a methodology for setting limits on digital euro ownership.

The next phase of research is planned for the coming year, with a decision on whether to proceed with further preparations for CBDC not expected before the end of 2025.

Why the digital euro is needed: ECB's perspective

The ECB argues that the digital euro is necessary to address the challenges of the digital economy and maintain financial stability.

According to the ECB, the digital euro will be a safe and reliable complement to cash.

"A digital euro could offer people a way to buy goods without relying on payment service providers controlled by non-European companies, such as Mastercard, Visa, Apple Pay, and Google Pay," said ECB President Christine Lagarde.

The ECB also believes the digital euro will ensure seamless access to financial services, including fast and low-cost payments, even in remote regions. This, in turn, will strengthen the Eurozone's competitiveness and enhance trust in the European financial infrastructure.

The dark side of digital euro

The digital euro, like other CBDCs, raises serious concerns about violations of financial privacy and increased state control over citizens' finances.

Unlike cash, transactions using the digital euro will be fully traceable, depriving users of privacy, despite ECB assurances to the contrary.

This approach creates risks of abuse: governments or financial institutions could gain unprecedented access to data on citizens' spending, income, and financial habits, threatening their financial independence. It turns CBDC into a tool of total control that could be used for economic and political pressure.

Another alarming aspect is the potential for manipulation of digital assets, including the introduction of "expiry dates" for money, forcing citizens to spend their funds within a specific period.

Moreover, the digital euro could allow authorities to instantly freeze or confiscate funds. In politically unstable environments or with the misuse of such powers, this would weaken trust in the financial system and pose significant risks to personal freedom.

Conclusion

The digital euro project aims to adapt the European financial system to the challenges of the digital economy, enhancing its competitiveness. However, despite its touted benefits, such as convenience and security, the initiative raises significant concerns about a lack of privacy, increased government control over finances, and the risk of manipulation of digital assets.

The decision to implement the digital euro could become a turning point for the EU if the regulator fails to strike a balance between innovation and citizens' rights to financial independence.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.