ECB Considers Digital Currency To Avoid Dependency On US Big Tech, China's Payment Systems

The European Central Bank (ECB) has been researching the feasibility of a digital euro since October 2021.

A decision on whether to proceed to the testing phase is to be made by EU heads of state this autumn.

The motivation for a digital euro arises from concerns that the Eurozone could become caught between U.S. big tech companies and Chinese payment systems, with a resulting lack of digital platforms.

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Economist Guido Zimmermann told CNBC that the ECB is "worried" that the eurozone will end up in "a geopolitical and economic sandwich position" between the big tech companies of the U.S. and the payment systems of China without a digital euro.

European officials are keen to avoid a situation in which consumers and businesses in the region are dependent on U.S. big tech companies for payments.

"The goal, I think it is a fixation for some, of ensuring the sovereignty or power of the EU, is the main driver for the digital euro in Brussels, and in Frankfurt," he said.

The concept of sovereignty is of increasing importance in the EU, with geopolitical tensions rising in recent times, notably with Russia’s incursion into Ukraine.

ECB president Christine Lagarde has been a vocal advocate for the digital euro, too.

It is “a common European project” and it “would essentially serve wider public policy objectives, such as strengthening Europe’s strategic autonomy,” she said.

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