The Crypto Holding Period – Germany’s Most Unnecessary Tax Privilege
By Co-Pierre Georg
10 March 2026
Almost two thirds of all private crypto gains in Germany remain tax-free – an almost unique special path in Europe. Four reform models show how the crypto gap could be closed – with additional revenues of up to 11.4 billion euros for 2024 alone.
47.3 billion euros: that is the amount of gains German crypto‑asset investors realised in 2024. Because of a regulation that is almost unique in Europe, almost two thirds of these gains remain tax-free – while capital gains from shares have in principle been subject to the flat withholding tax since 2009. The result is a crypto gap: a striking unequal treatment between asset classes – with tangible consequences for tax fairness and government revenues.
The magnitudes at stake become clear in Figure 1: even under conservative assumptions (including a decline in investment due to higher crypto taxes and high tax compliance), potential additional revenues amount to up to 11.4 billion euros depending on the reform model – for 2024 alone.
Figure 1: Potential additional tax revenues from crypto assets in Germany (2024) under four reform models.
Germany’s Special Path in a European Comparison
The core of the German special path in crypto taxation is the so‑called holding period: in private assets, gains from crypto assets are in principle tax‑free if the asset is sold after more than one year. Within the EU, this is the exception, not the rule. Many member states tax crypto gains in a similar way to other capital investments – in some cases at a flat rate, in others progressively; some rely on wealth‑ or imputed‑return models. Figure 2 shows how small the group of countries is that offer a holding‑period exemption.
Figure 2: Crypto taxation in the EU (simplified taxonomy, individuals). Germany (DE) highlighted.
What is the “Crypto Gap”?
The gap has two components. First: the holding period renders long‑term capital gains tax‑free – a privilege that does not exist for shares. Second: even for short‑term gains, enforcement is difficult because transactions take place on many platforms and the data situation for tax authorities was incomplete for a long time. Industry estimates suggest that only a small proportion of all taxable crypto gains are declared correctly.
In two Bundestag debates in autumn 2025, this unequal treatment was pointedly addressed. During the adoption of the DAC‑8 implementation act on 6 November 2025, Isabelle Vandre (Die Linke) criticised the “absurd special path” of the holding period and called for its abolition. One month later, in the Bundestag debate on Bitcoin on 5 December, Max Lucks (Bündnis 90/Die Grünen) spoke of a “crypto gap” that urgently needed to be closed. And SPD MP Jens Behrens also signalled a willingness to address the issue together in a legislative process.
The term crypto gap captures the problem quite precisely: when large gains in one asset class are systematically treated differently, this not only leads to a loss of revenue – it also erodes the perception of fairness and equal treatment.
Why the Special Treatment?
From an economic perspective, it is hard to justify why crypto assets in particular should be permanently treated more favourably than comparable risky capital investments. So far in Germany, crypto assets are treated as private economic goods, such as art or vintage cars, and thus explicitly differently from, for example, shares. A few years ago, this classification may have made sense because the market for crypto assets was still underdeveloped, but by now market participants treat large crypto assets like high‑risk tech stocks and not as a “safe haven” like gold.
If Bitcoin was truly “digital gold”, it would have to behave analogously to gold in stress phases: with rising prices when uncertainty increases. The data say otherwise. Bitcoin is around three to four times as volatile as gold and one and a half to two times as volatile as the most important high‑tech stocks. Figure 3 shows the average price reaction around macroeconomic shock events: gold rises immediately after the event, while Bitcoin falls in parallel with large US tech stocks (the “Magnificent 7”). Markets therefore price Bitcoin more as a risk asset than as a store of value – and precisely for that reason a tax‑law special treatment as supposedly “new gold” is no longer politically justifiable.
Figure 3: Average price reaction of Bitcoin, gold and “Magnificent 7” around macroeconomic shock events (normalisation: event time = 100; 10‑minute intervals before/after the event).
The tax classification in Germany has been gradually specified since 2013 – starting with a query by then FDP MP Frank Schäffler to the Federal Ministry of Finance, after which Bitcoin was recognised as a “unit of account” or private economic good. On this basis, and supported by further interpretative guidance and BMF letters, a regime emerged that provides for a one‑year speculation period for private crypto disposals. Today, this element is at the core of the crypto gap.
Four Reform Paths – From Simple to Systemic
If policymakers want to abolish or replace the holding period for crypto assets, at least four plausible models are on the table:
Scenario 1: Abolish the holding period within the existing § 23 EStG. Crypto gains would still be treated as private economic goods but, as with other private sales transactions, would be taxed without exemption at the individual income tax rate. Historically, adjusting speculation periods within § 23 EStG is not new: in the Tax Relief Act 1999/2000/2002, the holding period for property was extended from two to ten years and the period for other economic goods was increased from six months to one year.
Scenario 2: Equal treatment with shares (§ 20 EStG). Gains would be taxed, like capital income from share sales, at a flat withholding tax rate (25% plus solidarity surcharge). As the average value of a crypto portfolio in Germany is 57,300 euros according to industry data – and even BlackRock, the world’s largest asset manager, cites only 1–2% as a “reasonable range” for a Bitcoin share in a multi‑asset portfolio – it is likely that crypto gains would otherwise be taxed at an expectedly high income tax rate of up to 45%. Many crypto investors would probably be better off with taxation in line with shares than in Scenario 1.
Scenario 3: “Dutch model” (imputed return on wealth stock). In the Netherlands, crypto assets are taxed in the so‑called Box 3: based on the wealth stock and a notional return estimated by the tax authorities. This considerably simplifies enforcement but is conceptually a systemic change.
Scenario 4: “Swiss model” (wealth tax). Crypto assets would be included in a wealth tax that differs by canton but is generally comparatively low. Politically and constitutionally, introducing a wealth tax in Germany is particularly controversial; at the same time, this model would yield the lowest tax revenue.
Figure 1 makes the trade‑off visible: the closer the model is to a taxation of realised gains (Scenarios 1 and 2), the higher the potential revenues, even if one assumes that investors no longer invest in crypto assets, or invest less, because of the taxation. Systemic alternatives (Scenarios 3 and 4) are in some cases administratively simpler (because it is easier to analyse crypto‑asset holdings than the entire transaction history) but – depending on the parameters applied – deliver significantly lower additional revenues.
The Industrial Policy Argument Is Not Convincing
A common counter‑argument is: stricter taxation would drive away innovation and companies. The European comparison speaks against this. Austria fundamentally reformed the taxation of crypto assets on 1 March 2022; gains there are in principle taxed at 27.5%. This has not harmed Vienna as a crypto location – on the contrary: large crypto firms such as Bybit, which has made Vienna its European headquarters, and the Austrian company Bitpanda have even increased their footprint in the Austrian capital.
The truly relevant question is therefore less “whether” than “how”: how can a framework be created that ensures equal treatment between asset classes, improves enforcement and reporting structures, and increases legal certainty for citizens and companies? The DAC‑8 implementation act, which the Bundestag passed in November 2025, stipulates that … This is a first step towards transparency. Now it is up to policymakers to provide clear answers in the area of taxation as well.
Conclusion
The crypto gap is not a law of nature but a political decision. Anyone who takes tax justice seriously can end the German special path – without stifling innovation. Abolishing the holding period or equal treatment with shares would be legally straightforward and fiscally effective; alternatively, systemic models could be discussed. In any case, the following holds: the longer policymakers wait, the greater the unequal treatment and enforcement deficits become. It is high time for policymakers to wake up and abandon the German special path in crypto taxation.
Anyone who wants to see for themselves what tax revenues could look like under different parameters and models can do so at kryptoluecke.de (German only).
Europe’s Digital Identity Wallet: The Promise, the Problems, and the Questions We’re Not Asking
By Sharmin Chougule
05 February 2026
The EUDI Wallet is coming to Europe by 2026. But while a universal digital identity sounds laudable, the tight schedule and complex architecture suggest a deeper tension. We are at a critical juncture: Is this a foundation for trust, or the quiet assembly of a surveillance apparatus?
Created with Adobe Firefly.
1. The Problem we’re trying to solve
Imagine this: You’re booking a flight in Germany, you want to rent a car in Italy, you’re opening a bank account in France. Each time, you need to prove who you are. You dig through desk drawers for your passport or identity card, you wait on hold to verify your identity with a call center, you have to take pictures of your face, fill out physical forms by hand, scan documents and send it all by mail. Unless you have a phone with NFC reader and your ID is acceptable in that e-verification format the former scenarios still represent how identity verification works across Europe in the majority of cases.
This is one of the problems the European Union is trying to fix with the European Digital Identity (EUDI) Wallet, mandated under the new eIDAS 2.0 Regulation. Starting in December 2026, every EU Member State must offer citizens a digital wallet, an app on your phone. It allows you to prove your age, provide information regarding your driving licence, your professional qualifications or your bank account, without exposing unnecessary personal data in the process.
It is to be noted that identity theft and account takeover have emerged as significant threats within Europe’s online fraud landscape, with phishing and social engineering remaining the primary vectors for credential theft.1ENISA: ENISA Threat Landscape: Finance Sector, January 2023 to June 2024, Brussels: European Union Agency for Cybersecurity, 2024, available at: https://www.enisa.europa.eu/sites/default/files/2025-02/Finance%20TL%202024_Final.pdf
On paper, the EUDI Wallet is a win: faster services, less fraud, more citizen control. But if looked at closely there appears a gap between the promise and the reality.
2. What’s actually happening under the hood
2.1. The technology works but the problem is everything else
The technical architecture of the EUDI Wallet is sophisticated. It uses cryptographic protocols with names like Password Authenticated Connection Establishment (PACE), Basic Access Control (BAC), and Extended Access Control (EAC). Don’t worry, you don’t need to know what they mean.
The key innovation is selective disclosure like Zero-Knowledge Proof (ZKP), which is a potential game-changer. Think of a ZKP like a bouncer at a club who verifies you are “over 18” by scanning a green light on your ID, without ever seeing your actual birthdate. It proves a fact is true without revealing the data behind it. This allows for genuine privacy-by-design. Furthermore, with an EUDI wallet you can prove you’re over 18 without revealing your birthdate, for example prove your age to an online store without uploading your passport. You can confirm you have a valid driving licence without exposing your home address or licence number. While all this sounds feasible, one has to remember that technology doesn’t exist in a vacuum. A perfect cryptographic protocol cannot fix a broken governance model.
The European Commission spent 2025 translating the EUDI vision into operational rules. In May 2025, they adopted the Implementing Regulation that specifies how Member States submit wallet certifications. Italy has begun beta testing. Germany’s digital ID programme officially launched with biometric integration. By the metrics of regulatory efficiency, it’s all moving forward. Yet beneath the implementation announcements lies a deeper question: Who controls the infrastructure, and what are they using it for?
The European Union is also exploring blockchain and distributed ledger technology (DLT) as a potential component of EUDI infrastructure, not as a mandatory core, but through pilot projects and the European Blockchain Sandbox initiative. The appeal is real: instead of storing credential issuance and revocation lists in centralised government databases, some Member States are testing blockchain solutions to create immutable, decentralised trust registries.
Pilot projects are experimenting with Decentralised Identifiers (DIDs) anchored to public blockchains, including Ethereum, Cheqd, and Internet of Things Application (IOTA), as mechanisms to prove credential ownership without revealing the issuing authority. On the surface, this appears to solve the concentration problem: if identity verification is genuinely decentralised, then no single actor (government or company) can control the infrastructure.
Yet, this framing obscures three critical problems. First, who actually governs these ‘decentralised’ systems? Public blockchains like Ethereum are run by networks of validators, essentially, computers around the world that verify transactions. But these validators aren’t evenly distributed. If most of them are controlled by a handful of companies or concentrated in specific countries, is that really decentralisation? And what happens when a government decides that a particular blockchain ecosystem is a geopolitical threat? Second, blockchains are slow and expensive. They consume more energy and process transactions more slowly than traditional databases. When we talk about blockchain use on such a large scale, we should look into the European Sustainability Goals.
The EUDI framework does not transparently discuss the performance trade-offs or environmental costs of blockchain integration. It might be beyond its scope or maybe with the assumption that Europe’s sustainability goals are anyway applicable irrespective of whether a piece of regulation specifically calls out for it or not. Is the claimed privacy or decentralisation benefit worth the infrastructure burden? Third, and most importantly, governance remains centralised regardless of technical innovation: Member States still certify wallets, still control credential issuance rules, and still retain oversight authority. This means blockchain provides technical immutability but may not provide structural governance decentralisation. The distributed ledger creates what we might call “trust theatre”, technically interesting and genuinely innovative, but not transformative. It allows policymakers to claim they are advancing decentralisation while maintaining centralised control.
When the wallet becomes obligatory by December 2026, the odds are low that Member States will implement fully blockchain-integrated systems; historical precedents from eHealth and prior EU digital initiatives suggests that significant delays are probable instead. And the so-called Blockchain Trilemma is another challenge: Security, scalability, and decentralisation are challenging or rather impossible to achieve at the same time. Until the window of December 2026 closes blockchain remains a potential future feature, if used correctly, rather than a confirmed architecture, and when the window does arrive, blockchain will likely serve as infrastructure sophistication rather fulfil hopes of power redistribution.
2.2. The surveillance paradox: What the EU isn’t saying loudly
Here’s where things get interesting. During the legislative negotiations, a debate erupted over Article 452Article 45 of the eIDAS Regulation (specifically the recast eIDAS 2024/1183, originally the 2014 eIDAS Regulation with a 2021 proposal for amendment). This article mandates that web browsers recognise QWACs issued by EU Member States’ designated Qualified Trust Service Providers, though the final text does not mandate unconditional trust.
The legislative debate on this concerns a contentious provision that requires browsers to accept these EU-approved certificates, which has generated significant opposition from cybersecurity experts and browser vendors due to security and interception concerns. We should note that most European citizens don’t know this debate happened. and ‘Qualified Website Authentication Certificates’ (QWACs). Security researchers and browser vendors warned that the initial proposal could have forced browsers to trust government-issued certificates without exception, effectively creating a technical pathway for ‘man-in-the-middle’ interception.3Joint Open Letter by 400+ Scientists & NGOs on eIDAS, Nov 2023. Is this a direct threat today?
The practical implementation of this balance remains contested between browser vendors, EU authorities, and security researchers, and will be determined through enforcement and standards-setting procedures.
The final text of eIDAS 2.0 includes a compromise: browsers must recognise these certificates, but they are not forced to compromise their own security standards to do so. The immediate danger of a mandatory ‘backdoor’ has been averted.4Bitkom Position Paper on eIDAS 2.0 Trilogue Outcome, Nov 2023. Yet the regulatory framework persists and future amendments could eliminate browser discretion without renegotiating the entire architecture, making the current compromise vulnerable to regulatory reinterpretation. The compromise itself is revealing. It shows how digital identity infrastructure is inherently contested between citizen privacy, law enforcement access, and national security interests. This isn’t a technical question that engineers solved. It’s a political choice that remains unresolved.
If a government’s certificate key were compromised tomorrow, current rules let browsers reject it. But regulatory reinterpretation could mandate trust: no new law required, just administrative discretion. The danger is: Once governments normalise interception infrastructure, removing it becomes politically challenging. This is not a claim about current intentions in Brussels or national capitals; it is a warning that once such capabilities are built into the infrastructure, they can be used, or expanded, by future governments regardless of their original purpose. The concern here is less about declared political intentions today and more about the structural possibility of interception that the infrastructure quietly enables for tomorrow.
This illustrates the tension between regulatory trust assumptions and cryptographic trust properties. Legal frameworks cannot reliably constrain technical capabilities once they exist. This is particularly acute in EU digital identity architecture where regulatory mandates intersect with browser security models over which they lack full control. These are largely designed and controlled by non‑European providers. The EU can set legal obligations, but it cannot directly reconfigure how these browsers implement their trust decisions.
2.3. The implementation crisis nobody’s talking about
The deadline is December 2026, less than 12 months away. Sounds doable? Maybe. But look at the historical track record. The original eIDAS Regulation was adopted in 2014. Widespread compliance took years longer than expected. As noted earlier, eHealth initiatives across Europe have repeatedly missed implementation targets. Testing, interoperability, cross-border certification, all of this is harder in practice than in regulatory timelines.
As of the beginning of 2026, here’s the reality:
Italy is beta testing. A few other Member States have pilot projects.
No major Member State has announced full production deployment.
Cross-border interoperability testing is still ongoing.
Certification procedures are still being refined.
Some Member States will hit the December 2026 deadline. Others won’t. What happens then? Do businesses remain exempt from accepting wallets if the technology isn’t ready? Can relying parties defer integration? The framework doesn’t say.
This fragmentation creates real legal and operational uncertainty. Relying parties (banks, government agencies, companies) will face a patchwork of wallet solutions on different timelines. Citizens in Member States that miss the deadline will experience service delays. Interoperability failures will accumulate.
2.4. The accessibility crisis: Digital infrastructure as gatekeeping
Here are scenarios the EUDI policy documents don’t really address: A 78-year-old in rural Spain with minimal digital skills. An asylum seeker in Belgium without a consistent address or government ID. A visually impaired user in France whose bank’s wallet app doesn’t work with screen readers. A teenager without a smartphone trying to access age-gated services.
The EUDI framework mandates that private entities accept the wallet whenever identification is legally required. It does not mandate offline fallbacks. This creates a critical gap: What happens when citizens cannot use the wallet? The regulation uses permissive language, for Member States to ensure alternative means remain available. But it’s not mandatory. In practice, this means banks can make the wallet the default, relegating alternative verification to cumbersome offline processes. This isn’t formal exclusion. Its functional exclusion achieved through design.
The evidence from other EU digital initiatives is instructive. Estonia is often cited as the model for digital governance, yet the data reveals a stark ‘grey digital divide.’ While 98% of young Estonians use digital services effortlessly, research shows that over 70% of citizens aged 75+ do not use the internet at all, leaving them dependent on proxies or physical assistance.5Leppiman, A., et al. (2020): Old-Age Digital Exclusion as a Policy Challenge in Estonia and Finland. In: Walsh, K. et al. (eds.): Social Exclusion in Later Life. International Perspectives on Aging, Springer, S. 409-419 (Noting that internet usage drops significantly after age 75, a demographic often excluded from standard “16-74” statistical surveys).
Statistics Estonia (2019/2023) data on internet usage by age group. When services like tax filing or health records become ‘digital-first,’ this group is effectively pushed into second-class citizenship. For the skilled, it is efficiency; for the unconnected, it is a barrier.
If the EUDI Wallet follows the same pattern, the most vulnerable populations, elderly, disabled, asylum seekers, people in rural areas with poor or low connectivity, will be systematically excluded from services they legally should be able to access. There’s no mandatory testing with vulnerable populations. There’s no requirement that offline verification remain genuinely available (not just theoretically available). There’s no tracking of how many people actually can’t use the system.
2.5. The power problem: Who controls your identity?
If the EUDI Wallet becomes the de facto identity infrastructure… then whoever controls it has gatekeeping power over European economic and civic life. Who are these gatekeepers? They are the state agencies that can revoke your ID at the click of a button. They are the tech giants (Apple, Google) whose operating systems host the wallet. They are the issuers (banks for instance) who decide if your credentials are valid.
This isn’t paranoia. It’s basic infrastructure governance. When you centralise identity, you centralise the power to exclude. Think about what happens when your wallet is blocked, deleted, or suspended. You lose access to banking, government services, healthcare portals, and commerce. In practice, this means identity infrastructure becomes financial infrastructure: when the wallet fails, everyday economic participation fails with it. The framework includes safeguards: citizens can appeal certification decisions, and the system includes data minimisation. But these are limited protections. A government can refuse to certify a wallet. Citizens have limited immediate recourse if their wallet is suspended.
Private wallet providers face different pressures. They must comply with government certification, handle personal data under GDPR, and respond to relying-party requests. Yet the framework doesn’t clearly limit their ability to refuse service to specific users or categories.
Over time, we’re likely to see market concentration. Large tech companies (like again Google, Apple) may dominate with wallet solutions, leveraging existing user bases. Financial institutions may develop proprietary wallets. EU-funded consortia will look to create “official” solutions. But relying parties will face pressure to accept all certified wallets, creating complexity and cost burdens. The incentive structure likely favors large, stable providers over niche alternatives.
2.6. The question of standards and global power
Europe isn’t alone in building digital identity infrastructure. Singapore has its National Digital Identity. Canada is developing its Digital Credentials ecosystem. India has Aadhaar and even DigiLocker. Global standards organisations are competing on specifications.
The EUDI is effectively Europe’s bid for global digital identity standards leadership. If eIDAS 2.0 becomes the de facto standard, through EU market size and regulatory power, then European norms about data minimisation, transparency, and citizen control become global norms.
Conversely, if competing models dominate elsewhere, European digital identity principles become parochial. This standards competition has reflective implications for global data governance, privacy protection, and power distribution. It’s not just technical. It’s geopolitical.
3. What needs to happen now
The infrastructure decisions are being made now, often without transparent public deliberation. Three things matter:
3.1. First: Accountability must be proactive, not reactive.
The EUDI framework spreads responsibility across multiple actors: Member States certify wallets, private providers operate them, relying parties integrate them, citizens use them, and the European Commission oversees the system. But responsibility fragmentation creates accountability gaps, exactly the kind of gaps that emerge when new infrastructure fails.
Consider a scenario: A wallet provider uses cryptographic services from a third-party vendor. That vendor is compromised. Citizens’ credentials leak. Who’s liable? The wallet provider? The vendor? The Member State that certified the wallet? The bank that relied on it? The framework doesn’t clearly answer.
For financial compliance, currently, when you apply for a loan, it requires handing over your entire digital life. With the EUDI wallet, you could cryptographically prove for example ‘Income > €50k’ or ‘Credit Score > 700’ without revealing your employer or full transaction history.
For banks, however, this is a double-edged sword. On one hand, it promises to slash Know Your Customer (KYC) costs by replacing manual checks with cryptographic certainty. On the other hand, it turns every major bank into a mandatory ‘Relying Party’ (unable to add independent verification and data assessment). By 2027, banks must accept these wallets for Strong Customer Authentication (SCA) under PSD2/PSD3 rules. If a wallet is compromised or wrongly issued, the result is not just a privacy incident, the consequences ripple and scale quickly: it can lead to account takeovers, fraudulent payments, and eventually a dispute over who carries the loss.
Or imagine a relying party accidentally receives too much personal data due to a malformed wallet request. Who bears the cost of the data breach? These questions will eventually be resolved through litigation and regulatory guidance. But waiting for court cases to clarify responsibility gaps is insufficient. By the time courts rule, damage has been done and infrastructure patterns are already embedded. Member States should publish clear liability mapping before wallets go live in 2026.
Also, not every person can read legal jargons. Laymen should be clearly informed about their rights, what they can refer to when things go sideways and what are their options for enforcing their rights in a proper manner. If despite having the digital wallet, citizens with a dysfunctional wallet have to wait the weekend for the bank’s regular office hours, that is likely to become a very frustrating weekend. The example of a bank is only indicative: a similar dead end can arise if, for instance, a job seeker’s wallet stops working when they try to identify themselves at the employment agency or social benefits office, delaying unemployment payments or housing support simply because no one can override the system outside ‘normal’ hours. Also, for instance, a patient’s wallet malfunctions on a Friday night and the pharmacy can no longer retrieve their e‑prescription, leaving them without essential medication until a physical urgent visit to the hospital or a helpdesk/alternative verification channel reopens. Can we expect a technical staff to be available like in some Asian nations in call centres? Where you can call 24×7 to seek assistance. In Europe, the demand for technical staff already outstrips supply: in 2022, over 60% of EU enterprises that tried to recruit ICT specialists reported difficulties filling those vacancies, according to Eurostat’s hard‑to‑fill‑vacancies statistics.6Eurostat: ICT specialists – statistics on hard-to-fill vacancies in enterprises (Statistics Explained article, Data extracted in June 2025).
This isn’t bureaucratic box-checking; it’s the difference between accountability that prevents failures and accountability that responds to them after the fact. Member States should publish clear liability mapping before wallets go live. There should be independent ombudsman mechanisms for citizen complaints. Regular public audits of wallet security, interoperability, and accessibility should happen, not just once, but continuously.
3.2. Second: Inclusion cannot be an afterthought.
If EUDI Wallets become mandatory for accessing essential services, then digital inclusion must be central to system design, not a compliance footnote. This means mandatory offline verification pathways (not permissive language about alternatives). It means accessibility audits before certification, with Web Content Accessibility Guidelines (WCAG) 2.17WCAG 2.1 is the international standard for making websites and applications usable by people with disabilities, requiring features like screen reader compatibility and keyboard navigation. compliance as baseline. It means explicit protection for populations unable to use digital systems. It means transparent reporting on inclusion metrics: How many citizens can actually use wallets? How does this vary by age, disability, geography, and immigration status?
The regulatory push toward digital identity should not replicate the digital divides that already exist in Europe. It should aim to rather find a way to reduce at the same time mitigate the impact of it.
3.3. Third: The surveillance question needs honest deliberation.
The TLS weakening provisions,8The encryption that protects most web traffic. Think of Encryption as a way of scrambling data so that only someone with the right and secured key can read it. state access requests, and mandatory acceptance architecture raise a fundamental question: Does the EUDI framework prioritise citizen empowerment or state control?
This isn’t a binary choice. But it requires honest deliberation about trade-offs. Current policy language obscures these trade-offs through rhetoric of “trust” and “security.” Genuine transparency requires:
Public debate about what genuine law enforcement needs actually exist, what security costs would follow, and whether governments should have routine intercept capabilities for digital identity traffic.
Independent security audits of wallet systems, with public reporting on vulnerabilities.
Transparent governance of standards development, with civil society participation.
Sunset clauses on security weakening provisions, periodic re-evaluation of whether surveillance architecture is necessary or merely path-dependent.
4. The moment is now
The EUDI Wallet represents a genuine European achievement in technical design. The ambition to provide all citizens with secure digital identity is laudable.
But the governance architecture, implementation timeline, and surveillance provisions create a fundamental tension that cannot be resolved through technology alone. It’s a tension between trust infrastructure and surveillance apparatus. This tension can be managed, but only through accountability, genuine inclusion, and honest deliberation about power. The window for this deliberation is closing. By 2026, wallet deployment will accelerate. By 2030, the infrastructure will be embedded in European life. Once embedded, the choices become harder to revisit. They become technical requirements, regulatory compliance, citizen habit.
This is the moment, now, for policymakers, businesses, civil society, and citizens to ask hard questions:
Does the EUDI framework advance European digital sovereignty, or does it create new dependencies?
Does it protect privacy or enable surveillance?
Does it include vulnerable populations or exclude them by design?
Does it distribute power more equitably, or concentrate it?
These questions deserve answers grounded in evidence, deliberation, and democratic legitimacy, not merely in regulatory compliance and implementation timelines.
The technical infrastructure is coming. The governance infrastructure, the one that determines how power is distributed and who benefits or loses, is still being negotiated. We should make sure we’re asking the right questions about it.
Article 45 of the eIDAS Regulation (specifically the recast eIDAS 2024/1183, originally the 2014 eIDAS Regulation with a 2021 proposal for amendment). This article mandates that web browsers recognise QWACs issued by EU Member States’ designated Qualified Trust Service Providers, though the final text does not mandate unconditional trust.
The legislative debate on this concerns a contentious provision that requires browsers to accept these EU-approved certificates, which has generated significant opposition from cybersecurity experts and browser vendors due to security and interception concerns. We should note that most European citizens don’t know this debate happened.
Leppiman, A., et al. (2020): Old-Age Digital Exclusion as a Policy Challenge in Estonia and Finland. In: Walsh, K. et al. (eds.): Social Exclusion in Later Life. International Perspectives on Aging, Springer, S. 409-419 (Noting that internet usage drops significantly after age 75, a demographic often excluded from standard “16-74” statistical surveys).
Statistics Estonia (2019/2023) data on internet usage by age group.
WCAG 2.1 is the international standard for making websites and applications usable by people with disabilities, requiring features like screen reader compatibility and keyboard navigation.
8
The encryption that protects most web traffic. Think of Encryption as a way of scrambling data so that only someone with the right and secured key can read it.
The European Parliament will define its stance on the digital euro in the first half of 2026, followed by negotiations with the Council and the European Commission. After that, several years will still be needed to build the technological infrastructure and the regulatory framework. If all goes according to plan, Europeans could be using the digital euro by 2029.
Yet over the past few years, the digital euro has turned into a contested project. It is frequently dismissed as “a solution in search of a problem.” In this vein, the European Parliament’s rapporteur, Navarrete, argues that priority should be given to a limited, offline digital euro—useful in case of outages, but not much more.
That position might be politically convenient, but analytically and historically weak. It overlooks the post-2008 debate on monetary reform as well as the quasi-oligopolistic structure of banking in many eurozone countries. In other words, it downplays some of the structural weaknesses of the current system that make a public digital alternative worth considering in the first place.
Rebalancing public and private money in the Netherlands in the aftermath of 2008
In the decade following the financial crisis, the Netherlands, along with Switzerland and the UK, had Europe’s most intensive debates about the monetary system and potential reforms [full disclosure: the author was involved in this debate from the beginning]. A central question in the Netherlands was: how do we restore the balance between public and private?
In 2015, the foundation Ons Geld (Our Money) collected 110,000 signatures, thereby placing the structural reform of money and banking on the parliamentary agenda. The citizens’ initiative argued that private banks wield excessive power in money creation and payments and proposed three changes: (i) reorient money creation toward public objectives rather than private gain; (ii) have the state provide a secure digital form of public money, functionally an alternative to commercial bank money; and (iii) stepwise alter the money-like status of bank deposits by removing public safety nets. In March 2016, the Dutch parliament debated the proposal and commissioned the Netherlands Scientific Council for Government Policy to conduct a study of the current monetary system and alternative architectures.
In the same year, another foundation, Full Reserve, attempted to establish a private, non-profit deposit bank. The idea was simple: A deposit bank would fully back deposits with (public) central bank reserves. It would not grant loans or make investments. Without taking those risks, it would only hold its customers’ money and process payments. Although the parliament unanimously adopted a motion to amend legislation so that Dutch citizens could save digitally at the deposit bank, this initiative was blocked by De Nederlandsche Bank, likely because it was a threat to the banking status quo.
In 2019, after three years of research, the Netherlands Scientific Council for Government Policy published its report Geld en Schuld (Money and Debt, translated into English in 2021). The Council defined two problems: the uncontrolled growth of debt and money, and a public-private imbalance in the monetary system. Although these problems are serious, the Council deemed two elements of the structural reforms proposed by the citizens’ initiative Ons Geld, i.e. changing money creation (i) and privatizing bank deposits (iii), too risky to pursue. Instead, the Council only proposed a safe public alternative alongside existing private bank money: either via a private or public deposit bank, or via digital central bank money. Such a public option would have a disciplining effect on private banks. If citizens and firms can credibly opt out into a public alternative, private banks are pushed to fund themselves with more equity and longer-term debt. According to the Council, such a public alternative would also pressure banks to offer savers a higher interest rate.
From The Hague to Frankfurt and Brussels
In 2019, then-Minister of Finance Wopke Hoekstra rejected the introduction of a deposit bank. He argued that savings up to a certain amount are already protected under the deposit guarantee scheme and pointed instead to digital central bank money. With that move, the debate about a safe public alternative was effectively shifted away from The Hague and relocated to Frankfurt and Brussels—into the institutional arena of the ECB and EU co-legislators.
The ECB’s leading role in the development of the digital euro ensured that the process was mainly driven by technical expertise rather than political considerations. The ECB initially presented the digital euro as a digital cash option with the overarching goals of ensuring public access to central bank money in the digital age, stabilising the monetary system, fostering innovation, and strengthening Europe’s strategic autonomy. Digital cash was intended to serve the same functions as physical cash: as a medium of exchange, a means of payment, a unit of account and a store of value.
Over time, the objectives of digital public money have thus been narrowed from implementing a full competitor to private bank money to introducing a new means of payment. This narrowing has made it much easier to dismiss the digital euro project as unnecessary technocracy: a solution in search of a problem. But when viewed against the post-2008 debate, the underlying issues have not disappeared.
Quasi-oligopolies, weak competition, and low deposit rates
In addition, Europe’s banking market remains structurally fragmented. One reason is that banks operate internationally in good times, but when things go wrong, they are resolved nationally. This institutional asymmetry limits cross-border competition and helps reproduce a euro area banking sector that is both concentrated and insufficiently dynamic. The digital euro would offer a pan-European alternative.
Geopolitics is not a substitute
In recent years, European politicians and central bankers have increasinglyjustified the digital euro through geopolitics: reducing dependence on US actors and infrastructures. That argument has real weight, especially because payments have become intertwined with platform power, sanctions capacity and strategic autonomy.
But geopolitics should not become a rhetorical shortcut that replaces the harder conversation about Europe’s own domestic monetary and financial structure. “Competitiveness” is frequently invoked in Brussels, yet the banking sector’s oligopolistic reality is rarely placed at the center of that discussion. A limited digital euro risks becoming symbolic: geopolitically branded, but economically and practically timid. To avoid this, 70 academics — including Gabor, De Grauwe, Krahnen, Monnet, Piketty, Schoenmaker and the author — recently warned that a scaled-down digital euro would become a symbolic gesture rather than a solution and called on European policymakers to place the public interest and monetary sovereignty at the centre of the negotiations.
A worthy public alternative requires political choices
The key question now is whether the digital euro will be implemented as a worthy European public alternative or as a constrained add-on designed mainly to avoid threatening incumbents.
A worthy digital euro needs to be developed as a real alternative to physical cash and bank deposits. To safeguard financial stability, a gradual rollout makes sense. In the initial phase, holding limits can be kept low, and then gradually increased to stimulate competition and strengthen the credibility of the public option. At the same time, deposit insurance could be decreased stepwise. European people and businesses should be able to use and hold digital euros through a diverse range of intermediaries, which include non-profit and public entities. To improve the international role of the euro, access for non-euro people and businesses should be seriously considered.
Conclusion
After 2008, there has been an intensive debate on the public–private balance in money. In the Netherlands, there were concrete initiatives, a unanimous parliamentary vote, and a recommendation for a public alternative by the main government policy research council. Furthermore, quasi-oligopolies remain in banking in most eurozone countries. A digital public alternative was proposed to rebalance power. However, over time, the ambitions of the digital euro have been gradually narrowed. 2026 will determine whether European lawmakers allow the digital euro to grow into a credible public option or whether it becomes, in hindsight, a subject of countless conferences and debates, but little institutional change.
The Drift to Digital: Cashlessness, CBDCs and the Narratives We Need
Brett Scott in an interview with Caroline Marburger
21 August 2025
Cash is disappearing — not with a bang, but with the quiet hum of terminals, apps, and silent payment flows. Brett Scott argues that there is a systemic drift toward cashlessness, shaped not by a single decision-maker but by the forces of global capitalism. Still, the shift is often narrated as a matter of consumer choice.
A cash advocate, Brett Scott explores the politics of digitization, digital payments, and CBDCs and interrogates not just what people argue, but how they frame the conversation. As digital payments become increasingly dominant, the debate for or against cash, CBDCs or digital payments feels repetitive, invoking familiar binaries: state vs. market, control vs. freedom, innovation vs. nostalgia. The author discusses an anthropological perspective, his experiences in high finance and he explains why views on central bank digital currencies seem irreconcilable, and how alternative metaphors could facilitate a less entrenched discussion.
After completing your studies, in both anthropology and international development, you initially worked as a broker. What did you learn about our view of the monetary system during that time?
I ventured into the aggressive world of derivatives trading. This was partly an anthropological adventure, exploring the confusing power structures of the global economy. After all, the best way to understand something is to experience it firsthand.
But after working as a broker for a few years, including during the financial crisis, I realised though that expertise in high finance isn’t necessarily useful for understanding monetary systems. Many people in high finance have a superficial understanding of monetary systems because it is not directly relevant to their jobs. I eventually lost interest in high finance and became more involved with alternative money concepts. In 2013, I published The Heretic’s Guide to Global Finance. Hacking the Future of Money, which connected me with various groups working on alternative financial and monetary systems.
As you write in that book, the mainstream economic and finance debates too often are ‘exclusive talk shops for political elites and economic experts’. You are interested in alternative views. Do ideas from the tech sector — ideas and businesses which we often subsume under the term ‘fintech’ — offer such alternatives?
After the financial crisis, some tech groups saw themselves as being on a revolutionary path to digitising and democratising finance. They claim that the fintech sector is revolutionising finance, but in fact it is merely automating it. They provide what has always driven the capitalist system: automation. And thereby help big tech companies merge with the financial sector.
I realised that this fusion of big finance and big tech is manifesting itself in our society as a kind of ideological attack on the cash system. People are increasingly being shamed for not embracing digital acceleration. This mindset is even influencing central banks’ decisions, such as when they feel they must ‘keep up with the trends’.
You discuss a systemic push towards automation in finance and the decreasing use of cash in your last book, Cloudmoney: Why the War on Cash Endangers Our Money (2023), What do you mean when speaking of systemic changes?
I examine systemic tendencies of global capitalism. In such a system, you have internal pressures to expand and accelerate. Cash clearly slows things down — for Amazon, for example. However, Amazon and similar companies hardly ever pursue a direct anti-cash strategy. Only companies such as VISA or Mastercard have more open agendas, as they lose money when you use cash.
What starts to happen systematically though is: different actors are finding ways to slowly get rid of cash. Banks are closing ATMs and complaining that maintaining the infrastructure is costly, thereby making it harder for you to withdraw, use or deposit cash. This may manifest itself in your environment as a choice.
These changes manifest as choice? What do you mean by that?
For example: Five years ago in London, you could pay with cash or card at a train station. People started using cards. This didn’t mean, however, that they were asking for the cash system to be removed. However, once Transport for London (TfL) knew that enough people had cards, eventually they simply removed the option to pay with cash, allegedly in response to the increase in card use.1Editor’s note: Due to protests, a complete cash-free solution was abolished in June 2021, however, and cash is accepted again in many places.
What they have done is allow you to go through not only this but also that door. But then they closed this door. They have locked you in. They are the ones taking the choice away from you. You didn’t ask for it. But it suits their automation purposes. Yet, because you seemingly made a choice, you have this weird dissonance in your head: ‘Well, I guess we chose that, didn’t we?’
There are all these subtle nudging processes at play. This happens all the time in capitalist systems: several players make decisions on your behalf, but it looks like you have chosen something. So, in reality, there is no “war on cash” being waged by one actor but by many different players. But many of them don’t see themselves as agents of these developments. ‘It’s “just business”, isn’t it?’ They see what they do as merely reducing their costs by a tiny percentage.
This systemic push towards a cashless society is also one of the inspirations behind CBDCs such as the digital Euro?
The original advocates of CBDCs were monetary reform groups who claimed that the banking sector was too powerful and that commercial banks have too much power to issue their digital casino chips and dominate our lives with it.
You indeed describe bank or deposit money metaphorically often as „digital casino chips“. Please explain.
Most people when they’re thinking about the euro, the pound or the dollar, they think it’s a singular system. Words like money or the euro , it sounds like it is a single thing. But in reality, these are ecosystems, a chained ecosystem of different players.
You mean the modern two-tier monetary system.
Yes. A way to illustrate the basics of how it works is by using casino chips as a metaphor. Because most people can conceptually make a distinction between cash and the casino chip. It looks different, has a different name. I hand cash to a casino, I get chips, I can use the chips inside the casino, then I can come back, reclaim the cash and walk out. These are two separate forms of money. Cash is like a public form of of money issued by a central bank. The other is a private form of money: a casino chip issued by a particular entity, That is a very useful metaphor for talking about the banking sector, It is not perfect but it helps in order to understand what „going cashless“ also means. You know, what you are using instead of cash? You are using digital casino chips issued by commercial banks instead. These are what a cashless society is based upon.
And with an increase of cashless payments, the idea of a central bank digital currency suddenly makes more sense?
Some of the early CBDC advocates said: With less cash in use, we need a different type of digital money to counterbalance the increasing power of privately issued money and reduce the power of the banking sector. The banking sector keeps talking about the dangers of disintermediation instead.
Because people reach certain default conclusions depending on their political background. Without thinking about it. Your mind will just work it out for you. That’s why I talk about your background as a chessboard or game board that you have set up. The way you imagine society will affect how you analyse specific things within that context.
Which standard background assumptions are there and what conclusions do they usually lead to with regard to CBDCs?
If your background assumption is that first there is a fundamental distinction between government and market and second, that there’s a war going on between the market and the state — a classic libertarian assumption — you’ll automatically assume that a CBDC or the digital euro is the state’s attempt to dominate the market.
And the more left-wing perspective?
If you’re coming from a traditionally socialist perspective, the assumption tends to be that the whole society can work together to achieve a common goal: Right now, our system might still be dominated by big corporations, but if we all work together, we can create a better monetary system. A socialist or left-wing view of a CBDC would argue that the digital euro is currently being co-opted and watered down by the banking sector, essentially having its power removed so that it doesn’t compete with the banking sector. What should be done instead is to create a more powerful CBDC that could counteract the banking sector’s power.
And you also outline another perspective.
Yes, there is a more “anarchist” viewpoint. I come from an economic anthropology background, which has a strong tradition of examining the intricate connections between states and markets, and their symbiotic relationship. Because economic anthropology was originally closely connected with colonialism, you’d be highly aware of how imperial powers created markets. For example, they did this by forcibly making people pay taxes. Conquerors pulled the conquered into market structures by making them dependent on money. Precisely because it has witnessed first-hand the way states can artificially create markets, economic anthropology has a long history of such ‘anarchist viewpoints’. From that viewpoint thee supposed battle between the state and the market isn’t a battle. Rather, states underpin markets. And instead you debate the relative power of the different stakeholders.
If these basic assumptions shape our perception of a digital euro, what implications does this have for democratic discourse and debate? How can we avoid miscommunication and ensure that we facilitate a balanced discussion – without favouring one perspective over another?
That’s a fundamental communication challenge. Sometimes an idea fails to resonate because it’s not received properly. Finding ways to create accessible narratives is key. For instance, I try to effectively bypass political differences. I talk about cash being that public bicycle of payments versus the digital payments being the private Uber of payments: quite an effective way to immediately disrupt a bunch of ideas in somebody’s head. It is not a particularly ideological position. Rather, it is a structural statement about diversity and balance of power. Many can understand that it makes sense to keep both bicycle and Uber as options. It is also one of the most effective analogies because, there’s positive value attached to a bicycle. As an image, it breaks with the assumption of conventional narratives of progress, according to which greater complexity, speed, and scale are always better.
Different metaphors can illustrate various points. I also use the analogy of stairs versus lifts to discuss systemic resilience. Lift operators focus on profits by installing lifts rather than maintaining the stairs in your building. However, even though you use the lift almost all the time, you would probably still like the option of using the stairs. While lifts are convenient, having stairs as an alternative is crucial in case of an emergency. This analogy highlights the importance of having multiple options.
I think the bicycle-Uber metaphor is particularly effective because it conveys the positive values associated with bicycles, while challenging the idea that complexity, speed and scale are always better. Although simplicity is underrepresented in economic discussions, it resonates with many people. Such metaphors can therefore bypass standard political narratives.
People generally prefer to have more options. Even those who advocate digital advancements acknowledge the importance of maintaining choice. Asking them questions such as ‘Why are your options being reduced?’ can be revealing. When faced with the removal of cash, many people revert to narratives about progress. Asking why their options are being limited can encourage deeper thought and discussion.
You are first and foremost an advocate for cash and criticise the trend towards digital payments. A CBDC like the digital euro is intended to be ‘digital cash’, which is potentially a more cash-like digital payment method. What is your take on that?
The official discourse is often uninspiring, probably partly due to constraints on what institutions such as the ECB can express. Their statements are often banal. While this is not always the case, my experience of public consultations in the UK, as well as official statements from organisations such as the Bank for International Settlements and individuals like Christine Lagarde, is that they are often very generic. They keep talking about quiet advancements towards innovation.
I am frustrated by their refusal to acknowledge the politics of digitisation. They discuss it as if it were simply a matter of public preference, ignoring the structural processes and power dynamics at play. I question why people are moving away from cash. They fail to consider who is driving these changes. Their blanket statements inadvertently endorse current trends rather than them adopting a leadership role and critically examine the underlying reasons. Beyond basic Economics 101 explanations. This lack of depth is disappointing.
On the one hand, a CBDC could be seen as a further push towards digital payments, potentially rendering cash obsolete. On the other hand, a digital euro could offer an alternative in a digital space dominated by private money, providing more options for transactions, especially online. The EU’s current legislative package combines one piece of legislation that guarantees the preservation of cash and another that introduces the digital euro. What are your thoughts on this dual approach?
In a rapidly expanding capitalist system, merely stating neutrality towards cash doesn’t halt the systemic processes at play. Central banks often indirectly facilitate the transition to cashless systems. For instance, in the UK, they have permitted the decline in cash usage by not intervening. This isn’t neutrality; it’s a passive endorsement of the trend. I am more in favour of supporting cash than CBDCs, which ties into my broader scepticism about endless automation and digitisation.
These trends are unsustainable in the long run. While structural forces push towards these trends, a public version of digital systems might be preferable to a purely private one. If your role involves improving digital payment systems, introducing a public player could be beneficial. However, while improving the balance of power between different digital money players is important, this should never be allowed to act as a back-door way to push ever more digitisation in general.
I don’t fully agree with the underlying assumption. There is a risk that advocating for CBDCs could inadvertently support a broader anti-physicality movement, which could be more damaging than the public–private debate. The real issue is digital-physical dualism and the relentless push for acceleration.
There is significant discussion around the offline capabilities of CBDCs, with substantial funding allocated for their development. However, in my opinion, central banks should demonstrate real leadership by offering a vision that goes beyond the expected digitisation of money. Although digitisation is often touted as innovative, it merely follows expected trends and fails to address deeper human needs. People are increasingly burnt out by the relentless push for speed and efficiency.
I’m glad that responsible digitisation is being considered by your institute, but it remains within the overarching discourse. The non-digitisation perspective is often dismissed as nostalgia. However, a cultural shift could occur if people started to see analogue and non-digital things as forward-looking and essential, rather than just nostalgic or backward. This is especially important to consider in light of resource constraints and our dependency on digital systems. Responsible digitisation should form part of a broader programme aimed at rebalancing our systems.
Um dir ein optimales Erlebnis zu bieten, verwenden wir Technologien wie Cookies, um Geräteinformationen zu speichern und/oder darauf zuzugreifen. Wenn du diesen Technologien zustimmst, können wir Daten wie das Surfverhalten oder eindeutige IDs auf dieser Website verarbeiten. Wenn du deine Zustimmung nicht erteilst oder zurückziehst, können bestimmte Merkmale und Funktionen beeinträchtigt werden.
Funktional
Always active
Die technische Speicherung oder der Zugang ist unbedingt erforderlich für den rechtmäßigen Zweck, die Nutzung eines bestimmten Dienstes zu ermöglichen, der vom Teilnehmer oder Nutzer ausdrücklich gewünscht wird, oder für den alleinigen Zweck, die Übertragung einer Nachricht über ein elektronisches Kommunikationsnetz durchzuführen.
Vorlieben
Die technische Speicherung oder der Zugriff ist für den rechtmäßigen Zweck der Speicherung von Präferenzen erforderlich, die nicht vom Abonnenten oder Benutzer angefordert wurden.
Statistiken
Die technische Speicherung oder der Zugriff, der ausschließlich zu statistischen Zwecken erfolgt.Die technische Speicherung oder der Zugriff, der ausschließlich zu anonymen statistischen Zwecken verwendet wird. Ohne eine Vorladung, die freiwillige Zustimmung deines Internetdienstanbieters oder zusätzliche Aufzeichnungen von Dritten können die zu diesem Zweck gespeicherten oder abgerufenen Informationen allein in der Regel nicht dazu verwendet werden, dich zu identifizieren.
Marketing
Die technische Speicherung oder der Zugriff ist erforderlich, um Nutzerprofile zu erstellen, um Werbung zu versenden oder um den Nutzer auf einer Website oder über mehrere Websites hinweg zu ähnlichen Marketingzwecken zu verfolgen.
RSS-Feed zum eFin-Blog abonnieren
