The digital euro is coming to compete with Visa and Mastercard: what is it?

The project predates this presidency of Donald Trump, but with it the Europeans realized that they are at the mercy of any whim of the American president, also that force these companies to disconnect their services to European customers.

In practice, a digital euro will have the same value as its equivalent in coins or banknotes. To use them you will have to create a specific account, which can be created in the European Central Bank itself, something that commercial banks do not like very much because they fear a leak of funds. These digital euros will be used as a means of payment using cards, banking applications or directly on the cell phone.

Commercial banks allege that the digital euro it is unnecessary. She criticizes its cost (she herself estimates it at 20.5 billion dollars, when the ECB alleges that it will not reach 6 billion), but above all that capital flight. The ECB reassures the banks that the new system will not allow massive withdrawals of money from bank accounts, but Citizens will be able to transfer their money to an account at the European Central Bank.

The bank fears that citizens, the majority with memories of the 2008 financial crisis, think that the safest place to keep their savings It is an account at the ECBsomething that is now impossible to open but that will be allowed with the digital euro. Right now, Visa and Mastercard concentrate 61% of payments by card in the Eurozone and almost all cross-border operations.

After this Tuesday’s vote, there are still battles to be defined and one of the most important is that “individual holding limit”. It is still necessary to decide whether to put a limit on the amount of money that a person can store as digital euros and, if applicable, what that limit would be.

The bank wants it as low as possible to avoid leaks to the Central Bank European. That tenure limit is a political decision, not a technical one. Because the digital euro could work exactly the same with holding limits of 1,000 euros or one million. The ECB has always advocated a low limit to keep the banks in the project, but they have always fought against it.

The digital euro is a digital version of the euro, but it is both a lot more. It is not only about allowing the creation of European digital payment methods, but also about stopping dependence on other American ones such as PayPal or Apple Pay. And it is a political instrument, not just a payment instrument, because it leads to a substantive debate that is more political than technical.

Who should control digital money in Europe? American companies that can block their operations with a presidential order issued from the White House?

Critics of the project claim that the privacy of payments, unlike with cash, is not fully guaranteed. The regulation approved this Tuesday by the Economic Affairs Committee of the European Parliament excludes full anonymitybut guarantees a high level of privacy in payments.

The ECB assures that it will not identify people by their payments and that only the originator of the payment and the beneficiary they will know the data personal payments.

The text approved in the Economic Affairs Committee of the European Parliament is the signal that the legislative will give its approval in the first days of July. After this process, the Ministers of Economy and Finance of the 27 must approve it, although no problems are expected because the support is broad among the governments and does not need unanimity. Approval is expected before the end of the year.

The bank also fears that governments will use it to skip their work (very well paid) of intermediation. That it serves, for example, for governments to pay social benefits, direct aid and all the transfers they make to citizens. without depending on banking networks private. It would be another blow to his business.