Pressure mounts on the European Central Bank’s (ECB) plans to launch a digital Euro by 2029, as key German banking associations raise serious concerns about the bank’s suitability to lead the project. While acknowledging the potential of a digital currency, representatives from the German Sparkassen- und Giroverbandes (DSGV) and the Bundesverband der Deutschen Volksbanken und Raiffeisenbanken (BVR) are questioning whether the ECB, traditionally focused on monetary policy, possesses the necessary market acumen and operational expertise to successfully develop and deploy a competitive digital payment system.
The digital Euro has recently entered a new development phase following a two-year preparation period, signaling a distinct acceleration towards a potential launch. However, the criticisms are escalating. Joachim Schmalzl, a DSGV board member, articulated a core concern, stating that the ECB appears to overestimate its ability to create a market-viable product. He questioned the logic of a European regulatory body, like the ECB, asserting its ability to develop and control a nationwide payment solution, arguing that it lacks the vital connection to customer needs and the crucial experience derived from real-world market competition.
The banking associations are advocating for a greater role for private sector actors in the operational design and implementation of the digital currency. Tanja Müller-Ziegler, a BVR executive, emphasized that payment systems are inherently collaborative endeavors, requiring integration with existing banking infrastructure to effectively reduce Europe’s reliance on U.S.-based payment providers. She suggested that a digital Euro directly linked to existing bank accounts could strengthen Europe’s financial sovereignty, a goal seemingly undermined by the ECB operating a parallel payment infrastructure.
Reassuringly, the associations have pushed back against anxieties that a digital Euro could accelerate the phasing out of cash. Schmalzl highlighted the extensive ATM and branch network maintained by Sparkassen and Volksbanken, affirming their commitment to physical currency. He asserted that consumer choice remains paramount and will not be compromised.
However, skepticism surrounds the communication strategies employed by proponents of the digital Euro. Criticism has emerged alleging that dissenting voices are being unfairly characterized as anti-European on professional networking platforms like LinkedIn. Müller-Ziegler questioned the rationale behind defending a system where “authority replaces the market” implying a lack of substantive justification for the ECB’s approach.
Furthermore, a fundamental regulatory dilemma remains unresolved. Concerns have been voiced regarding the appropriateness of an institution simultaneously acting as overseer of banks and payment systems, while also functioning as a payment provider itself – a situation likened to a referee participating in the game. Schmalzl warned that, “The referee should not play”. The associations are now demanding that the ECB’s role be strictly limited to facilitating the digital currency, accompanied by stringent democratic oversight of any future developments.
Adding to the doubts, the banking associations are openly questioning whether the current digital Euro design ultimately addresses a tangible problem. According to Müller-Ziegler, “In its current design: no”. Any genuine benefit, they maintain, would only be realized through an offline functionality, enabling payments even during system failures – a feature currently lacking in the ECB’s proposed framework.