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The European Central Bank (ECB) has presented the central bank digital currency, the digital euro, as a new, better alternative for citizens: free, anonymous, and reliable.
The ECB began preparations for the Digital Euro in November 2023.
It is designed to be a government-issued alternative to existing cashless options like credit cards, apps, and cryptocurrencies.
The Digital Euro aims to allow direct payments through digital wallets, smartphones, and computers, bypassing banks and payment gateways.
Unique Features of the Digital Euro
Unlike other digital payment options, the Digital Euro is directly issued by the ECB
It is managed by the ECB to facilitate cost-effective national and international payments.
Micro Payments: It aims to reduce the high costs of small transactions, often caused by banks and payment-service providers.
The Digital Euro allows offline transactions, ensuring that payments can be made without internet access.
It is a digital version of cash and not a payment certificate between financial service providers.
Advantages
The Digital Euro offers free transactions and can maintain anonymity, especially for offline payments.
It allows for direct payments between users without the involvement of banks or intermediaries.
It provides an efficient and low-cost alternative for making payments, particularly for small transactions.
The ECB sees the Digital Euro as a way to reduce reliance on non-European financial service providers, particularly U.S.-based ones.
The Digital Euro aims to increase the competitiveness and resilience of Europe's payment system against global alternatives.
Differences from Cash and Digital Payments
Like paper money, the Digital Euro represents wealth but in a digital format; it will be managed by the ECB and can be used for direct transactions without intermediaries.
Unlike PayPal or bank transfers, which rely on debt claims between financial institutions, the Digital Euro is a direct state-backed currency.
Criticism
Critics argue that the ECB's push for the Digital Euro is more about strengthening Europe's global financial influence and sovereignty than simplifying everyday payments for citizens.
Although it could offer anonymity, this is not the central goal, and there are concerns about potential privacy issues.
The Digital Euro may be seen as reinforcing the capitalist framework by making money even more centralized and potentially easier to control.
Critics claim that the ECB's framing of the Digital Euro as an evolutionary step in currency is more about promoting its own monetary policies rather than genuinely improving users’ financial lives.
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