The long and winding road towards a wholesale digital euro caught between geoeconomics and bureaucratic politics

Whereas the European Union, under the aegis of the European Central Bank, has taken major strides toward the introduction of a retail central bank digital currency (CBDC), it is lagging behind, also compared to other major jurisdictions, concerning the development of a wholesale CBDC. The wholesale CBDC, which is, financially, more important and compared to other major jurisdictions it is spending much less effort on it. Why? We account for this puzzling outcome by combining two theoretical approaches that have seldom been employedrarely deployed jointlyin tandem: geoeconomics and bureaucratic politics. Empirically, we demonstrate that a geoeconomic rationale, specifically, concerns about ‘monetary sovereignty’ and ‘strategic autonomy’ of critical financial market infrastructures in Europe, as well as the desire to increase the international role of the euro, explains the drive towards a wholesale digital euro. At the same time, bureaucratic politics, to be precise, competing models sponsored by the main national central banks in Europe account for the slow progress towards a wholesale digital euro.