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'March to independence': Christine Lagarde wants EU to ditch Visa, Mastercard for own platform
(www.businesstoday.in)
this post was submitted on 05 Apr 2025
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Dโฌ will hopefully replace them. Important FAQ
I have a friend who works on this project. Still years away, but they are at least thinking very hard of not having US dependencies since the last months. I don't have much trust in some people involved though (exactly because for many this was not an issue until a few weeks ago).
I fear it will be horrible as long as it does not come close to something like Taler: https://www.taler.net/en/index.html https://www.ngi.eu/ngi-projects/ngi-taler/
Why? I don't get it, how is it better than SEPA?
When you're looking at your bank balance you're seeing bank Euros, for which your bank has to hold a certain percentage of actual (central bank) Euros in reserve (that's what fractional reserve banking is about: Not just the central bank, also ordinary banks can create money), when you transfer money to another bank the receiving bank will have to make sure that it has enough central bank Euros to back up the recipient's balance. SEPA is a standard interface and procedure to negotiate such transfers.
The Digital Euro is central bank money, just as bank notes and coins. It's a (possible) step towards a full-reserve banking system without having to actually keep actual notes and coins around. And the ECB is very aware of this which is why they're talking so much about limiting how many digital Euros you can hold at one time so the current banking system doesn't get completely up-ended over night.
...if that doesn't really answer anything then that's because money is fucking complex, and how our system works is completely unintuitive. But, essentially, Digital Euros are the same stuff as money under the mattress, just digitally.
I just thought we've had this forever, so maybe that's why I'm confused.
I mean technically, yes, the accounts that banks have with the ECB are exactly this Digital Euro thing: Digital central bank money, it's not like banks are storing banknotes in vaults nowadays. What's new is that not just banks will have access to that kind of account.
What I missed before, another thing that this enables is a way for the ECB to do helicopter money. Back during the financial crisis the ECB was battling deflation, lowering interest rates didn't help as banks were risk-averse and simply didn't want to lend any more Euros from the ECB, and one dead-simple and ludicrously effective way to battle deflation is by increasing the monetary supply by just giving everyone money. The digital Euro would provide infrastructure for that. Another interesting idea would be to pay out the seigniorage (money the ECB makes by collecting interest from the banks) directly to the people, currently it's (aside from financing the ECB itself) landing in the coffers of the central banks of the eurozone members, and from there in the general state budget. Wouldn't be much, like 3-10 Euros a year per Eurozone resident (probably should be citizen but don't make me look up that number), but at least it would nip certain conspiracy theories ("the state is indebting everyone with fiat money) in the bud.
But all of that is possible now. What exactly are we trying to change?
It's possible in principle now. But not actually. There's no button the ECB can press. Quite relatedly, the German government wanted to distribute its income from CO2 taxes to the people and had lots of trouble actually getting bank details for everyone.