The European Central Bank (ECB) has been working on a digital currency for some time now; its “preparation phase” commenced in November 2023. This currency is meant to be the government’s alternative to existing cashless options such as credit cards, apps, cryptocurrencies, and bank transfers. People can use the digital euro to pay directly from a digital wallet, on a smartphone or computer, without involving a bank or payment gateway. Depending on the end device, the money can be transferred via Bluetooth, a browser extension or a smartphone contact.
The digital euro differs from other types of digital payment options because the ECB issues it directly. Indeed, this central bank digital currency is expected to be an infrastructure that the ECB manages, making it possible to process national and international payments between citizens and companies quickly and cost-effectively. It will also be used for micro payments, which are currently disproportionately expensive thanks to banks’ and payment-service providers’ conventional cost structures. The cost-neutral digital euro effectively allows for new business models. The ECB has thus presented this as a new, better alternative for citizens: free, anonymous, reliable. But this is not the truth about the purpose of digital currency.
The decisive difference
Anyone who buys with cash has abstract wealth in the form of printed paper that changes hands. With paper money, the seller holds a state guarantee that the bill of exchange also counts as such wealth. According to Karl Marx, this money, which is “the universal substance of existence for all, and at the same time the common product of all”, is the “real commonwealth” of capitalist society. In this practically validated commonwealth, money is not an aid to production but its ultimate purpose: things are only produced if and insofar as they prove their worth in bringing money-value wealth into existence.
In such a society, in which buying and selling are not marginal phenomena but the form of its general metabolism, a temporary lack of money shouldn’t bring all social transactions to a grinding halt. Accordingly, banks have been granting loans long before there was digital access to personal accounts. What used to be the promissory bill is now a number in an app on your phone.
Anyone who pays by digital bank transfer, PayPal, etc. is already moving away from abstract wealth in the form of cash and towards digital certificates. PayPal therefore guarantees the seller that the buyer’s bank will provide her with the money to pay for the product.
This is the decisive difference from the digital euro: it will not be used to digitally exchange debt claims between different financial service providers that are intermediaries between buyers and sellers. Instead, it is a digital version of legally valid cash. In November 2023, the EU Commission clarified the digital euro will be open to all citizens and won’t be limited to settling bills of exchange in interbank transactions.
Consolidation of private property
On the one hand, the digital euro is nothing but a collection of zeros and ones, bits and bytes, like the characters on our banking apps. On the other, we shouldn’t be fooled: this similarity doesn’t alter the fundamental difference in the political economy of the digital euro and debt to the bank. In contrast to the digital book money of the banks, the new currency is just cash in a technically new form and thus introduces the possibility of direct payment in the digital space. This emancipates the sphere of circulation on the internet from financial service providers and allows direct transactions between users.
There are also technical consequences. While payment transactions with debt relationships to banks or financial service providers such as PayPal can only be processed via the internet, the digital euro also allows offline payments.
As offline payments are supposed to be anonymous, public opinion often emphasises that the new digital currency “can keep up with the anonymity of cash”, as e-euro expert Tobias Weidemann says. Anonymity is certainly possible with the right technical design but it can’t be the principal motivation to develop the digital euro.
The list of good reasons for the digital euro are derived from the justifications for money 1.0. The euro’s functional definition, as a tool for private owners who may find it difficult to sell their goods or buy others’ without money, is repeated with digital money: “It would be just as practical at flea markets or in classified ads as it would be among friends when they are settling accounts for a joint undertaking,” per Mr. Weidemann.
In each case, private property is first assumed and money is then presented as practical so that its circulation is guaranteed. This is a circular argument: money as abstract wealth is nothing other than the objectification of private property in pocket size. Money is not only practical but practically necessary in a society in which everything is subject to the service of property.
The ECB presents the advantages of the new currency in three steps. The first headline claims “money is evolving”. This is of course a lie with which the ECB simply claims its monetary policy ambitions as an intrinsic necessity of modern currencies and thus sells it as a necessary evolutionary stage. This is also advertising in the spirit of justification: one’s own action is the midwife of an evolution that is coming, midwife or not.
It follows this with the well-known reinterpretation of money as a technical achievement, which in its digital version would do more to “make life easier”, a practical experience that probably only really applies to those who don’t only depend on money in principle to live but also have enough of it. But it is precisely these people who are at stake when smart contracts are to be concluded with the digital euro.
Contribution to Europe’s sovereignty
The ECB’s move is to strengthen the home of the euro through its digital variant. This is the imperialist twist: technical emancipation from financial service providers that are not headquartered in the EU and threaten to dominate digital payment options. The ECB claims a “digital euro would … contribute to the competitiveness and resilience of our payments landscape vis-à-vis payment service providers from non-European countries.”
Herein lies the rub: because it is not Europe’s own financial service providers that have prevailed as a digital payment alternative in the competition between financial capitalists, the EU wants to use a state alternative to prevent the digital circulation sphere from becoming dependent on U.S. capital.
But the European Union’s claim is not limited to this defensive prevention of foreign influence. Because the digital euro would be one of the first currencies available as a virtual means of payment, the EU hopes to destroy some of the business of foreign competitors as well. This strengthening of the euro, on its way to becoming world money used to do business everywhere in the digital sphere, is its political-economic claim.
It is better not to confuse this competition between the leading imperialist nations for a globally recognised currency with one’s own interest in shopping more easily on the internet. In this respect, those who understand the digital euro as a simplification of their lives and those who fear the “transparent consumer” are both wrong. It’s simply not about the effects of the currency on citizens.
Peter Schadt is union secretary, DGB Region Stuttgart, and teaches at the University of Stuttgart.
Published – November 12, 2024 08:30 am IST
