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1.2. The Digital Euro – “CBDC” and Online Payments

A new money is entering the world: central bank digital currencies, known in technical jargon short as CBDCs. The probability that we will have and use such money in a few years is quite high: in the Eurosystem this would be the so-called digital Euro. But what such CBDCs are for, is often unclear.

We rarely think about what happens underneath when we hold our devices or cards up to the payment device or click on this or that payment option on the Internet. But in order to get an idea of the potential of a CBDC, it is worth taking a look behind the scenes..

In this episode, eFin & Democracy takes a closer look at digital payments and gets to the bottom of the argument that a digital euro secures European sovereignty and independence. The historical background of today’s monetary system, the first steps of digital payments in the post-war period and how Europe differs from the United States when it comes to digital payments are addressed by Frankfurt-based economic sociologist Barbara Brandl. The fact that the prominent payment service providers and main drivers of digital innovation are seated in the United States has recently raised skepticism. At the same time, new global players are entering the scene. China is also working on setting up its currency as an attractive digital payment infrastructure. In this context, the “digital euro” project is particularly important, explains Carola Westermeier, who researches financial infrastructures, geopolitics and security from the perspective of political economy.

The Digitalgelddickicht discusses which needs Europe might specifically have with regard to payments. Since we use a global payment network on a daily basis, with 1. no significant major European player around and 2. with only private providers to choose amongst: Is there a need for a European infrastructure or a public alternative?

Season Digital Euro – Episode 2 | 27 July 2023

Guests

Prof.Dr. Barbara Brandl is Professor of Sociology with a focus on Organization and Economy» at the Goethe-Universität Frankfurt. She is member of the ZEVEDI Project Group Tokenized Finance».

Dr. Carola Westermeier is a lecturer and researcher at the Justus-Liebig-Universität Giessen». She co-leads the research project Financial Infrastructures and Geoeconomic Security» mit. She is involved with the discourse project„Democracy Issues of the Digitalized Financial Sectore“ and also a member of the ZEVEDI Project Group Tokenized Finance».

Cederic Meier is a researcher at the Department of State Theory, Political Science and Comparative Constitutional Law at the Georg-August University of Göttingen and conducts in-depth research on constitutional and monetary law issues related to digitalization. Under the working title “Constitutional Issues of the Digital Euro” he is working on his PhD with Prof. Dr. Florian Meinel.
> See also his contribution on the eFin-Blog (German only): Quo vadis digitaler Euro?»

Dr. Jonas Gross is an economist with expertise in the field of crypto assets and central bank digital currencies». He has written his PhD at the Universität Bayreuth on Monetary Economy and Digital Currencies. He is Co-Founder and Chairman of the Digital Euro Association (DEA), Co-Host of the Podcast Bitcoin, Fiat & Rock’n Roll as well as Chief Operating Officer at etonec, a company offering blockchain based payment solutions.

> Particularly recommendable and informative with regard to the digital euro is his podcast interview with Jan Ceyssens, Head of Unit in the Directorate General for Financial Stability, Financial Services and Capital Markets Union of the EU Commission, on the European Commission’s legislative proposal (German only): https://www.bfrr.de/der-gesetzesvorschlag-der-eu-kommission-zum-digitalen-euro-interview-mit-jan-ceyssens/ (10 July 2023).

Weiterführende Informationen und Quellen:

Proposal by the European Commission for a Regulation of the European Parliament and of the European Council on the Establishment of the digital euro», 28 June 2023.

Page on the „Digital Euro Package“ of the European Commission: https://finance.ec.europa.eu/publications/digital-euro-package_en

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1.1. The Digital Euro – Our second Cash?

The following diagnosis is undisputed: in Germany, but especially in other European countries, the use of cash is declining. Cashless payment, on the other hand, is on the rise. Would a  central bank digital currency, in our case the digital euro, be a good policy response in this situation? Only a few countries around the world have already introduced so-called “CBDCs” (central bank digital currency), but hardly any central bank is not discussing or planning it. The European Central Bank has been considering the introduction of a digital euro since Ovtober 2021, and the European Commission recently presented a legislative proposal to that effect. However, it is by no means generally accepted yet that the digital euro is needed at all.

 

In this episode, eFin & Democracy takes a closer look at the digital euro’s promise to be “digital cash”. We first clarify what cash is, what it can do, and how exactly its advantages could be replicated in a “digital” euro. In our everyday dealings, we are hardly aware of it: What distinguishes cash as public, state-guaranteed money in the first place, what are its qualities? Should the decline in cash use bother us? And what is driving the declining use of cash in the first place? 

 

The podcast sets out to answer those questions, explains the role of commercial banks and payment service providers in analog and digital payments, and sheds light on the anonymity and participation that cash promises. The big question remains how such qualities can be translated into the digital space.

Season Digital Euro – Episode 1 | 27 July 2023

Guests

Claudio Zeitz-Brandmeyer is consultant on payments and digitization at the vzbv – Verbraucherzentrale Bundesverband» (Federation of German Consumer Organisations). He is a member of the Payment Systems Market Expert Group of the EU Commission and a representative in the Payment Transactions Forum of the Deutsche Bundesbank. Previously, he worked as a research assistant for members of the German parliament on financial policy and studied economics and public policy.

The Finance Team of the vzbv: https://www.vzbv.de/experten/finanzmarkt

Cederic Meier is a researcher at the Department of “State Theory, Political Science and Comparative Constitutional Law” at the Georg-August University of Göttingen and conducts in-depth research on constitutional and monetary law issues related to digitalization. Under the working title “Constitutional Issues of the Digital Euro” he is working on his PhD with Prof. Dr. Florian Meinel.
> See also his contribution on the eFin-Blog (German only): Quo vadis digitaler Euro?»

Jana Magin ist Ökonomin und promoviert an der Heinrich-Heine-Universität Düsseldorf am Lehrstuhl für Monetäre Ökonomik bei Prof. Dr. Ulrike Neyer» zur Geldpolitik der EZB und insbesondere den konkreten Auswirkungen, das die Einführung digitalen Zentralbankgeldes auf Privathaushalte hätte.

Further Information:

Video Recording of the Panel Discussion: The Digital Euro – Pro and Con» , 18. Juli 2022, closing event of the Citizen Lecture Series ” Do you understand Krypto” at the Technische Universität Darmstadt with
Katharina Paust-Bokrezion , Head of Payments Policy, Political Affairs, Deutsche Bank, and Marcus Härtel, Market Infrastructure Expert, European Central Bank.

Studies of the Deutsche Bundesbank (in English):
Deutsche Bundesbank, Monthly Report January 2023, pp.93-106: Access to Cash in Germany»
Deutsche Bundesbank, Monthly Report January 2023, pp. 75-91: Mobile Payment Usage in Germany»

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