The geoeconomics of Central Banks Digital Currencies (CBDCs): the case of the European Central Bank (ECB)

Digital transformations and the expansion of digital finance have elicited intense debates on what ought to be the role of central banks as issuers of digital currencies (CBDCs). We ask why the European Central Bank (ECB), the European Union (EU) central bank, has taken a starring role in the introduction of a retail CBDC: the digital euro. We offer an explanation rooted in geoeconomics: the ECB has decided to be a ‘paladin’ of the digital euro to safeguard the ‘monetary sovereignty’ of the euro area and protect the ‘strategic autonomy’ of its retail payment system. As the rivalry of great powers intensifies, the ECB worries about the issuing of private digital currencies by (mostly, non-EU) private actors as well as the dominance of non-EU companies in retail payments. Currencies and payments are important public goods that can be weaponised. This explanation contributes to the emerging literature on central banks as geoeconomic actors and teases out the implications of this development for the ‘traditional’ mandate of central banks and their core tasks