ECB Chair Christine Lagarde suggests controls on spending for digital euro
ECB chair Christine Lagarde's recent comments about controls on the digital euro suggest that Europe's CBDC may not be as unrestrained as its digital pound counterpart, as discussions about programmability and controllability are happening at a high level.
The European Central Bank's (ECB) plans for a digital euro may include controls on how the currency is spent, according to ECB chair Christine Lagarde. During a prank call with a comedian pretending to be Ukraine's Volodoymr Zelensky, Lagarde stated that there will be an element of control on how people use the digital euro. She noted that the bank is considering whether, for very small amounts around €300 to €400, there could be a mechanism with zero control, but added that this could be dangerous. The comments indicate that discussions about Europe's Central Bank Digital Currency being programmable and controllable are happening at a high level.
A Central Bank Digital Currency (CBDC) is a digital form of currency issued and backed by a country's central bank. CBDCs are designed to operate similarly to physical currency but in a digital format. The European Union has been exploring the possibility of a "digital euro" since at least 2019. A CBDC with in-built rules and restrictions, or a programmable CBDC, allows issuers to exert greater control over how the currency is spent. For example, a programmable digital euro could be programmed only to be spent on specific goods or services or within a particular area, giving the EU greater control over its internal economy.
This increased control by issuers could lead to concerns over privacy and autonomy. Critics of CBDCs already have concerns about the possibility that they may play a role in surveillance. The prospect of a programmable CBDC has raised concerns in the UK, which is no longer part of the Euro area and has its own currency, the pound sterling. A recent petition against a programmable CBDC on the UK's official petition website garnered over 31,000 signatures. The government responded by stating that it has no plans to program any future UK central bank digital currency (CBDC) or restrict how money is spent, and that programmability features, if demanded by end-users, would be designed by the private sector wallets.
The European Union is reportedly considering programmability into the heart of its CBDC. In the Bank of England's most recent consultation paper on the digital pound, it states that the digital pound would be at least as private as current forms of digital money, such as bank accounts, and that digital pound users would be able to make choices about the way their data is used. The UK model is likely to resemble a public-private partnership, where users will use a virtual wallet from a third-party provider to access the digital pound.
While the ECB has yet to confirm the exact extent of privacy it will offer to digital euro users, it has released a report outlining the options. However, the comments made by Christine Lagarde suggest that the digital euro may not be as unrestrained as its digital pound counterpart. Discussions about Europe's CBDC being programmable and controllable are happening at a high level, indicating the possibility of a more restrictive digital currency for the EU.
