Proponents of a digital euro are facing political opposition to their plans for a central bank digital currency (CBDC) – and technocratic central bankers aren’t sure how to respond.
In the European Union (EU), officials have advanced multiple arguments in favor of issuing a digital euro – assuring that it will be usable across the bloc, offer privacy unmatched by other kinds of digital payment, and safeguard Europe’s independence from foreign payment providers.
But now, the EU's central banks, normally used to deploying technical or economic arguments, are facing a different kind of opposition that’s much more political. That opposition can start with legitimate concerns over privacy and the limits of government power – but can also venture into conspiracy theories that paint CBDCs as part of a much wider, orchestrated program of state control.
Anti-CBDC politics is seen across the Atlantic. U.S. presidential hopefuls Robert F. Kennedy Junior and Ron DeSantis have both painted state-backed digital currencies as a tool of surveillance and social control. EU lawmakers such as the Netherlands’ Marcel de Graaff have also suggested a digital euro could allow the government to limit purchases, coerce citizens or introduce a social credit system.
Responding to such sweeping attacks makes defending the CBDC that much harder, and central bankers are now figuring out how to respond.
For some of those opposed to the idea, “the creation of a digital currency in euro area or any other part of the world is becoming part of this huge plot – together with wokeism, together with the green agenda, and so on, to control the world and the lives of citizens,” Belgian Central Bank Governor Pierre Wunsch told attendees at an event on Thursday.
“It's quite clear that it's not only a purely rational debate,” he added. “We need to make sure that our people understand that it's not about control of their lives – which should be obvious, but apparently some people don't see it as obvious.”
For his Austrian counterpart, Robert Holzmann, the problem is the lack of positive narrative for the CBDC.
“What is still missing is a convincing storyline for the digital euro, something which we can put in front of people,” said Holzmann said Thursday, adding that proponents of the CBDC needed to emphasize the role of money as a public good, and the need for the European bloc to maintain monetary sovereignty in the face of threats from private operators or other countries.
The job might be easier if people realized there’s no parallel plot to get rid of cash, Holzmann said. But officials are also trying to engage with technical features of the proposed digital euro that would alleviate people’s fears.
“Of course we are concerned” about CBDC becoming part of the culture war, Evelien Witlox, programme manager for the digital euro at the European Central Bank (ECB) told the same event. “These are people of our society, we would like to take their concerns away – the problem is how we can do that.”
Witlox stressed features of the system that would mean the ECB can’t track data to private individuals, or program the currency to stop people spending their money as they wish. But there’s a further issue of credibility, she added.
“The next step is how can we convince people that we are telling the truth,” Witlox said. “We need to have a continuous dialogue, and I hope that we are able to convince people that the statements that we make are also the truth.”
Ultimately central bank officials are usually economists, not marketing experts, and technical answers may only go so far. As Erik Luts, chief innovation officer at Belgian bank KBC, said, for CBDCs to work, people need to trust them, and that requires its proponents not just to argue over details, but to convince them of honest motives.
“We can assure people you are not traced and we can prove it with audits and whatever, but if outside of the system people start talking about this and convincing each other on social media … then that is a big blow,” Luts said, adding that skeptics of big government are “not a bunch of people who believe that the world is governed by snake people – this is a mainstream movement.”
De Graaff’s concerns may represent an extreme, but plenty of other EU lawmakers have negative views, ranging from opposition to apathy. In a Monday debate at the European Parliament, Markus Ferber and Joachim Schuster, representatives from the parliament’s two biggest parties, both again asked what the point of the CBDC would be.
It’s perhaps that skepticism which has led officials to call for a go-slow over the laws that will determine privacy controls for the CBDC, which will need to be in place before the ECB takes any decision to issue.
“There's no pressure on parliament or council to finish this piece of legislation… I think slowing down is a very healthy thing,” Mairead McGuinness said of the bill on Wednesday, referring to the groupings of lawmakers and governments who now need to agree to the plans she put forward in July.
McGuinness suggested the law shouldn’t be finished until there’s a new parliament and a new commission in place, implying it will have to wait until at least November 2024.
That may be a pragmatic view as EU laws typically take years to deliberate and finalize. It may also be a political realization – that the best hope for her digital euro plans is if they are considered soberly and technocratically, rather than as a political plaything bandied about ahead of the June 2024 EU elections.