Central banks digital currencies: the case of the ECB

Digital transformations and the expansion of digital finance have elicited intense academic and policy debates concerning the role of central banks in providing digital currencies. This paper explains why one of the leading central banks worldwide, the European Central Bank (ECB), has shifted from initial lukewarm support concerning the prospect of issuing its digital currency to taking a leading role, jointly with the European Commission, in paving the way for the introduction of a digital euro. It is argued that geopolitical factors, notably, the safeguard of the ‘monetary sovereignty’ of the euro area, the digital euro as a ‘soft power’ tool and the promotion of the international usage of the euro with a view to underpinning it as a leading international currency have overcome some of the concerns previously held by the ECB. The paper also investigates the ECB’s involvement in policy discussions taking place on this matter at the international level, notably, in the Bank for International Settlements, the Financial Stability Board as well as the Group of Seven (G7) finance ministers and central bank governors. This paper contributes to the emerging scholarly literature concerning the rationales that inform central banks’ attitudes towards the issuing (or not) of digital currencies and more generally the role of central banks as geoeconomic actors in an increasingly geopoliticised (and fragmented) global economy.