This article was originally published by Daniel Lacalle at The Mises Institute.
Christine Lagarde, president of the European Central Bank, has announced that the digital euro will be ready for October 2025.
However, she stressed the importance of moving forward with the legislative process that would impose the digital euro, urging the European Commission, the European Council, and member states parliaments to accelerate the laws and directives that are required to make the digital euro viable.
Why the rush? The European Central Bank’s losses have risen to 7.8 billion euros, and the European monetary authority has posted the second consecutive loss, while sovereign bonds in Europe have slumped again in the first two months of 2025. The ECB needs a digital euro to wash away its disastrous policy of the past decade.
The second reason is because confidence in the ECB’s policy is declining, sovereign bonds are not a reserve asset anymore, and inflation expectations rise. The hurry to impose the digital euro also comes at a time when European member states have announced large plans to spend, borrow, and invest in defense. Thus, the digital euro is critical to imposing the use of the euro as a currency, expanding the control of citizens, and disguising fiscal imbalances with a dangerous tool issued by a monetary institution that has lost most of its credibility in the past five years.
Remember that the ECB’s mandate is price stability, but inflation in the euro area has exceeded 22% in the past four years. At the same time, the European sovereign bond index has fallen by 14% since 2022.
There is another important reason to rush the digital euro. Global central banks and investment firms are concerned that European states will confiscate the assets of the Russian central bank, setting a dangerous precedent that could affect the assets of other non-European nations. As foreign funds fearing confiscation may leave the European financial system, the digital euro may be a useful tool to impose the use of the currency even if demand declines.
The digital euro, which Lagarde described in 2022 as “a digital banknote with a little less anonymity than the paper banknote because it is issued and guaranteed by the central bank,” is an unnecessary and dangerous tool.
Central Bank Digital Currencies (CBDCs) have been gaining attention as the technology of the future for monetary systems, but beneath their promise of efficiency and innovation lies a more pessimistic reality: they can serve as tools for surveillance, eroding personal privacy and financial freedom.
In the European Union, where limits to freedom of expression and the cancellation of elections are already a concern, a CBDC can be seen as surveillance masquerading as currency.
CBDCs are not just digital versions of existing currencies; they are issued directly to accounts held at central banks, allowing for unprecedented oversight of financial transactions. This direct issuance means that central banks can monitor every transaction, including spending habits, savings, and borrowing activities. We can compare this system to having a police officer in your kitchen, underscoring the intrusive nature of digital currency.
The centralized management of financial data under CBDCs raises significant privacy concerns. CBDC supporters say that they can improve the know-your-customer (KYC) and anti-money laundering (AML) processes. However, these tasks don’t need a central bank digital currency because they can be done perfectly with current electronic money. Furthermore, if the European Central Bank is worried about advancing in the digital age, it would promote competition, not eliminate it. The example of China’s digital yuan is important because it combines technological advancements with heightened state control and surveillance capabilities. When the European Union leaders are constantly using the excuse of disinformation and interference to limit personal freedom, a digital currency can be a very dangerous tool used for societal control.
Beyond surveillance, the CBDC also offers the central bank the ability to control and manipulate financial behavior. By directly influencing spending patterns, central banks could impose penalties on individuals for transactions deemed unsuitable by politicians while rewarding those who bow down. Therefore, central banks could penalize excessive spending on carbon-intensive purchases or excessive saving. This level of control undermines the principles of financial freedom and privacy, turning CBDCs into instruments of financial repression rather than tools for economic efficiency.
The introduction of a CBDC at a time when European states are announcing hundreds of billions of additional spending and debt also presents significant economic risks. By bypassing traditional banking channels, CBDCs could lead to uncontrolled money supply growth, exacerbating inflationary pressures. The experience of 2020, where an excessive money supply sparked rapid inflation, validates these concerns.
Proponents of CBDCs argue that they can help combat financial crimes by providing improved traceability and transparency through distributed ledger technology, but this does not require a central bank digital currency. It is already available in the current electronic currency system with independent commercial banks.
Central Bank Digital currencies are sold as innovative and efficient solutions but represent a form of surveillance disguised as currency, offering central banks unprecedented control over personal financial transactions.
The European Central Bank does not want to accelerate the digital euro because of growing citizen demand, but because it fears its status as a world reserve currency issuer may evaporate and therefore needs to impose a form of control through finance.
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