Imagine a technology that could facilitate an unprecedented expansion of totalitarian power in the hands of the ECB and EU Commission. What could possibly go wrong?
If you are a citizen of one of the Euro Area’s 20 member nations and are wondering why the legacy media is suddenly awash with articles on the European Central Bank’s proposed digital euro after studiously ignoring its development over the past six years, there is a simple reason: the digital euro is closer than ever to becoming a reality — at least according to own architects.
In fact, the two main EU institutions driving its development, the European Central Bank (ECB) and the European Commission, are, if anything, determined to accelerate its roll out. Which kind of makes you wonder: why all the rush?
With the “preparation phase” of the digital euro scheduled to end in October and since the European Central Bank and the European Commission need the European Parliament, the EU’s rubber stamping chamber legislative assembly, to approve the definitive legal framework for the bloc’s proposed central bank digital currency, or CBDC, the time has finally come to sell the project to the people — with the help, of course, of the legacy media and news agencies.
However, it is not easy to sell a project that is broadly seen, even by many politicians and some central bank insiders around the world, not only as a “solution in search of a problem” but one that is fraught with risks. Even the German MEP appointed to lead the European Parliament’s legislative push for a digital euro, the Rapporteur Stefan Berger, become one of its fiercest critics, eventually stepping down from the role.
According to the German financial journalist Norbert Häring, the only identifiable function of the digital euro is to “help displace cash and bring Europe closer to total digital surveillance.” So, how do you sell a project whose advocates (in the words of Federal Reserve Governor Christopher Waller) “often fail to ask a simple question: What problem would a CBDC solve?”
The answer, it seems, at least in the case of the Euro Area, is to generate as much fear as possible about Europe’s dependence on US payments providers at a time when the US is increasingly viewed as hostile to Europe. Lagarde says that the digital euro is necessary in order to preserve Europe’s monetary sovereignty — oh, the irony. Last week, the European Central Bank chief economist Philip Lane warned about the risks of Europe’s outsized dependence on American payment providers leaving it open to future economic coercion. From Reuters:
“Europe’s reliance on foreign payment providers has reached striking levels,” Lane said in a speech in Cork, Ireland. “This dependence exposes Europe to risks of economic pressure and coercion and has implications for our strategic autonomy, limiting our ability to control critical aspects of our financial infrastructure.”
“We are witnessing a global shift towards a more multipolar monetary system, with payments systems and currencies increasingly wielded as instruments of geopolitical influence,” he said.
He warned that national card schemes have been entirely replaced by international alternatives in 13 of the euro zone’s 20 countries, making it imperative that the ECB pushed ahead with issuing a digital currency.
“The digital euro is a promising solution to counter these risks and ensure the euro area retains control over its financial future,” Lane said.[1]
And here comes the first big lie from the Reuters piece:
A digital euro would function much like cash, allowing people to make direct retail payments without relying on a card service provider.
This could not be further from the truth (as we will explain in point #2 below), but it sure sounds reassuring to EU citizens who continue to trust the word of the media on matters of great import. And there are few matters more important than the system of money we live and work under.
As we warned back in 2022, the mass development and rollout of central bank digital currencies would represent (and this, I believe, is not hyperbole) a financial revolution that threatens to radically reconfigure the very nature of money itself. And let’s be clear: this will not be a bottom-up revolution. There are no European citizens marching in the streets calling for a digital euro, for the simple reason that most people already believe they are using a digital euro currency every time they pull out their card or mobile phone.
But there are some key differences between the ECB’s proposed digital euro, and the digital euro currency currently in use. For a start, the former will be money issued by the state, via the central bank (though it will still be commercial banks that manage all the customer-facing activities) and users will be allowed to hold a maximum deposit of 3,000 euros at any one time [2]. The latter, meanwhile, is private money issued and managed by commercial banks.
As the use of cash has declined, in part because of the war waged upon it by the EU Commission and the ECB, the amount of public money in the economy has also declined. Now, the ECB and Commission want to reverse this dynamic by issuing their own CBDC. But this will have potentially far-reaching implications that should give all EU citizens pause. Here are five of the most important reasons why we should be terrified of the fast approaching launch of the ECB’s digital euro:
1. The Digital Euro Could (And Almost Certainly Will) Be Used As a Tool of Financial Surveillance and Control.
A central bank digital currency system will technically no longer require middlemen such as banks or credit card companies. That said, Europe’s largest financial institutions, many of which have been helping to build the architecture for the CBDC system, will find a new role in the new digital reality. This probably explains why the ECB is so keen on further consolidation in Europe’s banking sector: once the digital euro is firmly established, there will be even less need for choice and competition within the banking sector.
As the ECB noted in a press release last December, “Supervised intermediaries, such as banks, would play a key role in distributing the digital euro. They would act as the main point of contact for individuals, merchants and businesses for all digital euro-related issues and would perform all end-user services.”
Meanwhile, the ECB, like all central banks that end up launching a CBDC, will retain oversight and control over the creation, destruction, and movement of money, just as Agustin Carstens, general manager of the Bank of International Settlements, put it at a 2020 summit of the IMF:
“We don’t know who’s using a $100 bill today and we don’t know who’s using a 1,000 peso bill today. The key difference with the CBDC is the central bank will have absolute control [over] the rules and regulations that will determine the use of that expression of central bank liability, and also we will have the technology to enforce that.”
It is not just the prospect of the ECB and the Commission being able to track, trace and monitor all of our financial activity — what we earn, how we spend, what we save — that should terrify us; it is also the prospect of them being able to “program” money so as to achieve certain monetary, fiscal or social policy objectives.
In a fully cashless digital-euro system, the central bank and Commission would have a complete record of every transaction made by everyone, allowing it to essentially eradicate tax evasion. The potential applications go far beyond that, notes NS Lyons, a Washington DC-based consultant and analyst in his 2022 article CBDC Caution: A Central-Bank-Issued Digital Dollar Could Enable a Dark Future:
Fines, such as for speeding or jaywalking, could be levied in real time, if CBDC accounts were connected to a network of “smart city” surveillance. Nor would there be any need to mail out stimulus checks, tax refunds, or other benefits, such as universal basic income payments. Such money could just be deposited directly into accounts. But a CBDC would allow government to operate at much higher resolution than that if it wished. Targeted microfinance grants, added straight to the accounts of those people and businesses considered especially deserving, would be a relatively simple proposition.
Other potential forms of programming applications include setting expiry dates for stimulus funds or welfare payments to encourage users to spend it quickly in order to boost economic activity. It would be a central banker’s wet dream. Programmable money could also be used to encourage the right sorts of consumption and discourage or even prevent the wrong sorts. Taken to the extreme, governments could use CBDCs to exclude the deplorables and undesirables from the economy altogether.
As independent media outlets like this one have shone an ever brighter spotlight on the potential dangers of programmable money, the ECB has shifted its stance, claiming now that it will not use programmable money. But at the same time it has relabelled programmable money as “conditional payments” and appears to have given the job of programming these payments to the payment service providers who will be managing all customer-facing activities.
As Lyons warns, CBDCs, “if not deliberately and carefully constrained in advance by law,… have the potential to become even more than a technocratic central planner’s dream. They could represent the single greatest expansion of totalitarian power in history.” Imagine that power in the hands of the likes of Ursula von der Leyen and Christine Lagarde!
2. It Will Probably Accelerate the Demise of Cash… and By Extension, Financial Privacy.
The ECB, like the EU Commission, insists that a central bank-issued digital euro will co-exist alongside cash for many years, if not decades, to come. As we’ve noted in previous articles, cash, while in gradual decline in the EU, is still widely supported and used in many member states, particularly Germany and Austria. Also, as the near-cashless nirvanas of Scandinavia are discovering, cash offers payment systems greater resilience, particularly in times of war and rising cyber theft.
However, will cash enjoy a level-playing field with a digital euro? It’s unlikely…
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Nick Corbishley 