31st of May 2023

Concerning:The European Commission’s plan for the introduction of the digital euro

DearSir/Madam,

It has come to my attention that the Von der Leyen Commission is planning to introduce a proposal for legislation that would create the framework for a digital euro. Specifically that the Commission is expected to present a regulatory framework for the digital euro somewhere in June 2023, as announced by Fabio Panetta, member of the Executive Committee of the ECB.

By means of this letter, I would urgently request you, as an elected member of the European Parliament, to shoot this proposal down as soon as it is introduced. For the following reasons:

#1)IS IT DEMOCRATIC?

First of all, it has become crystal clear that the digital euro is a project that is solely being pushed, designed and implemented by the Commission and the ECB among themselves – without requiring much, if any, input from the members of Europe’s only directly elected representative body: the EP. From the certain tone of the pronouncements so far issued on the subject, it has become clear that both the ECB and the European Commission have already privately decided that the digital euro both should and will be introduced, no matter what the European Parliament might think about that. It is clear that the Von der Leyen Commission has made up its mind to forge ahead with the digital euro – which is, of course, a key component of the “digital transition”, which, as we know, is a key policy goal pushed by the Von der Leyen Commission: the total digitization and total electrification of European society. This is one-sided top-down approach is, however, not according to the proper values of democracy that the Union is supposed to stand for.

Seeing that a digital euro is an innovation that would have both a direct and indirect impact on the financial reality of EVERY European citizen, it seems odd that Europe’s elected representatives do not seem to be involved in the drafting of even the framework for the digital euro, but are apparently expected to rubberstamp a piece of far-reaching legislation that is presented to them as a fait accompli.

So far, the decision making process concerning the digital euro leaves much to be desired from the perspective of responsible democracy!

As far Europe’s adherence to the democratic principle, it is important to note that there appears to be significant resistance against the notion of the digital euro. This includes a broad lack of support from the general population ofthe EU. This also linked to a apparent broad refusal in European society to the “digital transition” as pushed by the Commission. In this context, I would like to take a side note and call your attention to the fact that on the first of December 2022, the Tweede Kamer (Dutch Parliament) adopted a resolution ordering the Dutch cabinet to not vote for the European digital identity (which is a key element of the Commission’s “digital transition”), due to worries about personal privacy, security and necessity. Unfortunately, the Dutch government’s representative staatssecretaris van Digitale Zaken Van Huffelen decided to unilaterally ignore this parliamentary order and vote in favour of the E-ID. I mention this to both illustrate the current hesitancy of a clear majority ofDutch elected officials vis-a-vis the “digital transition” and to illustrate the sad reality that the members of the present Dutch cabinet do not necessarily represent nor follow the decisions taken by the Netherlands’ elected representative body. For an ostensibly democratic body such as the European Union, this unwillingness of one of its member states to hark to the will of its own elected representatives, must be worrying indeed!

This patent unreliability of the government officials of at least one of the EU’s member states (although we know that this is a widespread problem in more than just the Netherlands) suggests that ifthe digital euro should be introduced, it should be introduced solely after a public referendum on the matter. Because it is simply too far-reaching and invasive a change to the basic fabric of European society to leave such a monumental decisions solely to the whim of Europe’s national politicians. Give the European people a chance to decide. Is that too much to ask in a democratic Union?

2) IS IT REALLY NECESSARY?

One of the main unanswered questions (which the Commissions has so far failed to answer) concerning the digital euro is whether it is actually economically necessary! For a new financial instrument the question of economic necessity is clearly fundamental. Both the Commission and the ECB clearly seem to think so, as they have already announced that “the digital euro should be there in about 4 years”. Even though, so far, economic necessity for the introduction of the digital euro has not been proven.

Let me repeat this: Economic necessity for this financial instrument has not (yet) been proven. However, we can predict that the introduction of the digital euro will in itself come with a price tag of several millions, if not billions of euros. So, we have to ask ourselves: Does the known expense of introducing the digital euro outweigh the unknown and unproven economic benefit of introducing the digital euro? Ifwe are willing to face up to the sad reality that the EU has lost a lot of popular support over the years due to financial improprieties (ranging from outright corruption scandals like Qatargate and the theft from the EU’s coffers committed by EU accountant Karel Pinxten to “institutional wastage” like the EU pension fund or the regular move between Brussels and Strasbourg), we have to work on the principle that EU needs to show more than ever that it can be“careful with our money”. In a serious economic downturn such as the one Europe is currently experiencing, fiscal propriety is more important than wild experimentation with citizens’ money. In a nutshell: If we want to restore the trust of the average European in the EU, then the EU can only so so by reducing financial wastage and by showing that the EU can be prudent in its public finances.

Although the burden of proof for the economic necessity of a new financial instrument lies with the people who are trying to introduce it (in this case: the Commission and the ECB), the conclusion that a CBDC is not economically necessary in a developed economy is, by the way, not one I myself have come to, on my own: It is telling that a number of developed nations around the world have toyed with the introduction of a CBDC and have decided to, after all,not go any further. The decisions of the governments of Japan and Switzerland to NOT continue with the development and introduction of a digital Yen and a digital Swiss Franc respectively, is telling, as both countries came to the conclusion that the electronic payment systems currently present in their economies are more than adequate to deal with any demands made upon their financial infrastructure by electronic trade. Simply put: Both Japan and Switzerland concluded that the introduction of a CBDC is simply unnecessary.

However, it is not just established western-style economic superpowers that have shown that CBDC’s may just be a colossal waste of time, effort and investment. After all, the clear failure of the People’s Republic of China’s e-Yuan (which was first introduced in 2021. Some background here: https://www.straitstimes.com/business/economy/chinas-much-hyped-digital-yuan-fails-to-impress-early-users) should be taken as a clear indicator that a CBDC has little economic worth to bring to the table in any society that already possesses a rugged and well-established electronic payment infrastructure. Such as Switzerland, Japan, China, or Europe …

Seeing that the EU has both a well developed economy and a well developed digitized financial system, there is no apparent economic need for the introduction of a CBDC, as a digital euro would simply reduplicate a financial infrastructure that is already there.

One specific argument for the introduction of the digital euro needs to be addressed:

That the digital euro would make Europe’s economy more independent of the US. The argument goes that Europe is currently too reliant on American financial companies (which is true!) and that the digital euro would be a tool to weaken Europe’s dependency on the US’s financial infrastructure. While it is true that some of the biggest credit card companies on the European continent are currently American, and that this is a problem that needs to be dealt with (as I am highly in favour of the de-Americanization of Europe), the solution to this is NOT the total digitization of our European coin, but the stabilization and democratization of the euro.

The solution to this continuing European dependency on US financial companies is:

a. to promote Europe’s own native financial & IT infrastructure, by means of the promotion of indigenous enterprise who develop indigenous European solutions; and

b. to counter the modern European trend of personal financial indebtedness. Simply put: If European citizens have fewer debts they will also have a reduced need for American credit cards.

Unfortunately, the notion of the digital euro ignores some of the biggest problems that currently stand in the way of the euro. Specifically:

The sui-generis status of the EU with a shakily democratic structure, numerous national opt-outs and the constant threat of potential breakdown and breakup through the possibility of a national “exit” loom like the sword of Damocles over the future of the euro, as this creates a fundamental uncertainty over the long-term prospects of the European project. Which is detrimental to the long-term, fundamental stability of any currency. In short: Nobody seriously believes the US dollar might ever disappear (collapse, perhaps, but not disappear), or the Swiss franc, or the Rand … But people can however imagine leaving the euro. This inherent instability ofthe euro cannot be solved simply by making the common coindigital. It can only be solved by resolving Europe’s self-defeating state of “sui generis” into a stable, democratic governmental and/or cooperative form. In other words: By giving the EU the democratic reforms it so desperately needs to survive!

Fiddling about with digital solutions to Europe’s fundamental democratic deficiencies is just wasting our time. Anything less than fundamental democratic reform is just cosmetic.

3)IS IT REALLY SAFE?

Another major risk of the digitization of the euro might be that this major change will be done through Chinese and American technology. We have already seen how the EU has fallen into the trap of using non-European technology companies (for instance in the installation of Chinese security cameras and heat cameras in the buildings of the EP itself!) - we need to ask ourselves: Do we really want to run the risk of our common coinage being based on technology that we ourselves have not developed and cannot fully control? Security is a primary concern. Making the backbone of our economic and financial system vulnerable to hacking (either by internal criminals/activists or by foreign agencies) seems incredibly irresponsible.

Moreover, the risks of privacy violations, the sharing or theft of personal confidential information of digital payers, and the potential doom scenario of state abuse of the formerly independent means of support and financial reserves of European citizens – which are all inherent in any digital, cloud-based system – are serious and have NOT been addressed in any satisfactory manner by the Commission and the ECB. So far, the proponents of the digital euro have given vague assurances that “everything will be fine” and that “cash will always be there” (which belies the daily reality of someone living in Belgium …), but have been unable to explain how this blessed state of “being fine” should be achieved. Because they cannot. Because any and all digital systems are vulnerable. Including and especially a centralized cloud-based system such as a CBDC, which is in essence a cryptocoin that sacrifices the ONE good point of crypto currency (= its decentralized structure) but keeps all the negatives.

So, seeing that the the digital euro seems to have no economic necessity, but does introduce a high risk for security and privacy breaches, we have to ask ourselves: What is the point?

#3 IS IT ECOLOGICALLY SUSTAINABLE?

The EU has transformed itself into the world’s greatest champion for sustainability, decarbonization and the fight against various greenhouse gas emissions. Which is (in itself) good, as nobody likes exhaust fumes! Taking care of our natural environment is VITALLY important! Let me be clear about that.

However, it is odd that the EU should choose to champion "green” in tandem with a drive to increase the electrification of the European economy and European society. Seeing that digital media and digital devices all require electrical power to run, seeing that electrical cars, electrical bikes and heat-pumps have already led to power-shortages and power rationing in several European countries (some background: for Germany, for Flanders and for Sweden) and that electrical power in the EU is largely generated through non-sustainable methods such as coal, gas and nuclear power plants (which I count as unsustainable as well as unfeasible because of the massive startup cost, the extended construction time and the huge amount of pollution that comes with the construction of any new nuclear power plant, let alone the risk associated with nuclear catastrophes and the nuclear waste produced once a new plant is finally operational), we can logically follow that the digitization and over-electrification of European society leads to an unavoidable increase in energy consumption and thus an equally unavoidable increase in demand for power generation capacity. Which we do not have.

On top of that, we know from experience that bitcoin mines (which is exactly the same technology as CBDC) are massive energy drains. This does not bode well.

We must come to the logical conclusion that the digital/electric transition cannot be combined with the green transition.As all the high-tech solutions that are being promoted to advance the “green transition” are by their very nature dependent on vast amounts of electrical power. The same is true for the digital euro. By its very nature, a digital euro requires electrical power to exist. And is therefore neither sustainable, nor ecologically sound, nor green.

#4 CONCLUSION

For all these reasons, I would kindly yet firmly ask you to NEVER agree with any and all proposals put forward by the Commission that would introduce a digital euro. Simply put: A digital euro should never exist.

After all: The digital euro is not economically necessary. Instead, it would likely cost us money. The digital euro would also present a serious security threat. Which is the opposite of what a currency is supposed to be. The digital euro would NOT fix the EU’s inherent, fundamental issues. Instead it would be likely to undermine the public’s trust in Europe even more. The digital euro cannot possibly be sustainable, green or ecologically sound in any way. By its very nature as a digital product, the digital euro requires significant reserves of electrical power to function, which need to be generated somehow. And which we currently do not have. Nor are likely to soon have.

So Iask you to shoot the digital euro down, as the truly terrible idea that it is.

I thank you for your attention. If you would like, I would be happy to continue this discussion in person.

NB: As this is a matter that affects all Europeans, I have also sent this letter to all members of the European Parliament. I hope you will find it worthwhile.

I look forward to your response with considerable interest.

Kind &European regards,

Erik Schrama

erik@eschrama.com

www.eschrama.com/european-action

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