Central Bank Digital Currencies and the Digital euro: A Comparative Prism Between Sovereignty and Technology

Abstract

Satoshi Nakamoto invented Bitcoin for the declared purpose of reducing the banks' central role in monetary systems. Due to the widespread circulation of the so-called classical cryptocurrencies, together with the classical digital payment tools, we could argue that the ambitious aim of the Bitcoin inventor is not too far from being reached, at least theoretically. The cryptocurrencies’ capacity to undermine the power of Central Banks is related to some features that make Cryptocurrencies and their technology appealing to the whole financial world. The lack of a centralised intermediary guarantees the accuracy of payments, and for this reason Cryptocurrencies can operate in the absence of state intervention.

On the other hand, private money, as is well known, is nothing new to contemporary society. Everyday payment instruments are already built on a completely digital infrastructure based on a clearing process between private banks. There are, in fact, sufficient arguments to claim that the wholesale money exchange is already based on private and fully digitalized money. In this sense, CBDCs have the aim of reducing the amount of private power so as to regain general control over daily payments, thus reaffirming the state’s monetary and technological sovereignty over a certain geographical area.

International positioning of widely used currencies such as the Euro, the Yuan and the US Dollar will highly depend on whether or not National Banks will be able to embrace the digital currency transition that’s currently under debate. These arguments are familiar to National Banks around the globe. Therefore, the design of the forthcoming digital currencies can change international relationships and digital sovereignty scenarios.

One of the main risks National Banks are facing is closely linked to the fact that technology and currencies promoted abroad can easily be used in every single country, thus reducing the role of National Banks. Moreover, risks connected to mass surveillance are always in place considering the capacity for central banks to be the node of every single transaction, and the super-agent of every single digital user account. The need to preserve the principles of democracy is already presenting in this initial stage of development. In other words, it is clear that national digital coins can undermine some democratic principles, such as privacy and rule of law.

Keywords: CBDC, Privacy, Central Banks, Digital Euro, Digital Dollar