Europe Seeks Digital Currency to Counter U.S. and Chinese Tech Dominance

The European Central Bank is building a digital currency to buffer the region from conflicts with China and the United States.

Back in October of 2021, the central bank began looking into the potential of a digital Euro. It will be up to European leaders this fall to determine whether the ECB should proceed with testing the necessary technological arrangements for Europeans to spend digital euros.

The central bank is concerned that without a digital euro, the Eurozone will be economically and strategically trapped between the dominant U.S. technology firms and the dominant Chinese payment systems. Guido Zimmermann, senior economist at German bank LBBW, told CNBC on Wednesday that Europe is now suffering from a lack of digital platforms.

Zimmermann said that big tech’s entry into the payments industry might increase the risk of market dominance and dependence on foreign payment systems, which could have serious repercussions for Europe’s strategic autonomy.

She stated that more than two-thirds of card payment transactions in Europe are already handled by companies located outside the EU, and that none of the world’s top five payment processors, including Mastercard, Visa, PayPal, Alipay, and UnionPay, are based in Europe. 

According to Zimmermann, European politicians do not want the region’s consumers or businesses to become reliant on the U.S. Big Tech companies for payment.

She also noted that European officials are working to prevent China from becoming the de facto currency standard along the “Digital Silk Road,” China’s ambitious plan to fund digital infrastructure development around the globe.