An empty podium tribune ahead of a press conference in the headquarters of the European Central Bank (ECB) in Frankfurt am Main, Germany, on 4 May 2023. The ECB’s governing council is expected to make a decision on whether to proceed with the digital euro next autumn, reports YLE. (Andre Pain – AFP / Lehtikuva)


THE EUROPEAN CENTRAL BANK (ECB) and national central banks in the eurozone have laid out plans to create a digital euro in order to provide an alternative to card payments as the use of cash continues to decline – particularly rapidly in countries such as Finland.

YLE in April reported that the digital currency would be used with a smartphone app, be it that of the ECB or a commercial bank such as OP or Säästöpankki.

An electronic equivalent to cash, it would be made available primarily to people, businesses and authorities located in the eurozone, although it could also be used by people outside the monetary union as long as they have an account with a bank within the union. It would offer two chief benefits over payment cards: it would neither leave the same kind of data trace, nor would not incur the same kind of transaction fees as payments processed by the likes of Visa or Mastercard.

Tuomas Välimäki, a board member at the Bank of Finland, reminded the public broadcaster that as consumers are shifting away from coins and bills toward cards and mobile apps, payments are becoming increasingly reliant on large technology platforms.

“Electronic payments are very very centralised,” he said. “We currently have two card companies whose debit and credit payments are used to make virtually all payments. With the other payment option, cash, being used less and less and becoming even more marginal in the future, we need a new means of payment from the viewpoint of operational security and disruption resilience.”

“So that no one has too strong a monopolistic power to start pricing payments.”

Officials involved in the preparatory work are presently looking to determine the appropriate degree of anonymity that strikes a balance between personal privacy and efforts to prevent crime such as money laundering and terrorism financing.

“In today’s world, you can’t even think that you could build a completely anonymous payment method,” stated Välimäki.

“The idea isn’t that the big brother will start watching you. The Eurosystem will never obtain information on what individual people are doing with their money, that’s something we’ll make sure of,” he assured.

China is presently trialling a centralised digital currency, known as digital yuan, in order to take the country cashless and boost the appeal of its sovereign currency internationally. The trial has also stirred up concerns that the digital yuan would enable the government to surveil its citizens even more closely and freeze the digital assets of, for example, dissidents.

The ECB launched the study and planning phase of the currency project roughly two years ago, focusing initially on fundamental questions such as the technological functioning of the payment method.

Välimäki told YLE that the ECB’s governing council will decide whether to move to the next preparatory next autumn. He estimated that the digital euro could be adopted no earlier than four or five years from now.

Aleksi Teivainen – HT