Europe considers a digital currency – this fall, the heads of state across the EU will have to decide if the ECB should push ahead with the next steps

The European Central Bank is working on a digital currency as the region seeks to protect itself from tensions with China and the United States. The central bank started investigating the feasibility of a digital euro back in October 2021. This fall, the heads of state across the EU will have to decide if the ECB should push ahead with the next steps, which include testing the necessary technical arrangements so Europeans can spend digital euros.

“The ECB is worried that the euro zone will end up in a geopolitical and economic sandwich position between the big tech companies of the USA and the payment systems of China without a digital euro. Right now, Europe lacks digital platforms,” Guido Zimmermann, senior economist at German bank LBBW, told CNBC Wednesday.

“The relevance of preserving geopolitical sovereignty has increased in recent ECB speeches and publications for a digital euro. This certainly has to do with the outbreak of the Ukraine war and the increasing global geopolitical tensions,” Zimmerman said.

ECB President Christine Lagarde said in November that a digital euro “is a common European project” and “would essentially serve wider public policy objectives, such as strengthening Europe’s strategic autonomy.”