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The European Central Bank and several EU governments are reportedly at odds over the regulatory framework for the digital euro.
A conflict is escalating between Europe‘s powerful nations and the European Central Bank regarding the regulation of the digital euro, a digital form of central bank money which has been in the development by the European central bank since 2021.
Per a Politico report, which cites sources close to the matter, several European governments, including France and Germany, contend that the ECB is overstepping its authority by controlling how much digital currency individuals can hold in central bank-backed wallets.
This seemingly technical dispute carries significant implications: should the ECB set a high limit, citizens could withdraw substantial sums from traditional banks during economic downturns, threatening financial stability, the report notes.
One diplomat stressed in a commentary for Politico that some countries are concerned that any limits on the digital euro could infringe on personal financial freedom, stoking fears of excessive monetary control.
European states challenge ECB’s control over digital euro
The report notes that the conflict between European states raises a fundamental question about the balance of power between the ECB and EU member states. As the ECB continues to assert its monetary authority, member countries push back, arguing for greater input in shaping the digital euro’s framework.
Officials from nine nations, including Germany, France, and the Netherlands, emphasize that the digital euro should not solely fall under ECB control, viewing it as a broader financial issue with far-reaching implications for everyday transactions in Europe.
In mid-September, data from the U.S.-based Atlantic Council think tank revealed that 134 countries all over the world are one way or the other studying central bank digital currencies, up from 35 in May 2020. The data shows that over 65 countries, including India, Australia, and Brazil, are in advanced stages of CBDC exploration, whether in development, pilot, or launch phases.
Every G20 country is now investigating its own CBDC, with 19 in the advanced stages of exploration, per the think tank.