Germans Prefer Carrying Cash as CBDC Decision Looms

The future of the digital euro could be decided next year. 

But as Bloomberg News reported Sunday (Aug. 18), many people in Europe’s largest economy have already made up their minds about the concept of a central bank digital currency (CBDC).

According to that report, about half the people in Germany say they can’t even imagine using the digital euro, with privacy concerns and a preference for cash driving these feelings.

Privacy concerns have also driven some of the anti-CBDC sentiment in the U.S., with the House of Representatives in May passing legislation that would require Congress to OK any issuance of a U.S.-backed digital currency.

The report describes a recent trip to the German central bank’s bunker in the town of Cochem, where a group of local retirees expressed skepticism about the possibility of a digital euro. One said card and online payments already left her feeling like she had no control over her spending, while others said a CBDC could leave Germany overly dependent on technology.

One of those pensioners, Hans Heinrich Kloeppel, told Bloomberg he prefers using cash most of the time, though “out of habit, I guess.” 

The report noted that the European Central Bank (ECB), which is expected to make a final decision on whether to implement a CBDC late next year, is aware of the concerns around it. To that end, the bank plans to address privacy and security fears with techniques such as data encryption and hashing to avoid a link between transactions and specific users. 

In addition, the ECB plans to make the currency available via card — and not just on mobile phones — for offline usage, the report added. 

“We envisage a digital euro as a digital form of cash that can be used for all digital payments, coexisting with physical cash, leaving no one behind,” ECB President Christine Lagarde said last year as the project’s preparation phase began.

In other recent CBDC news, the Bank of England said last month it was conducting a new series of experiments with the digital currencies for retail use.

Citing growing innovations and risks in the payments industry, BoE said in a discussion paper that “central banks must be quick to engage with them and prepare for their implications.”

“Our programme of experiments would be grounded in a set of policy outcomes which we seek from innovations in wholesale central bank money,” the bank said in the paper. “The programme would cover both wCBDC (wholesale CBDC) and synchronization, as well as the relative merits of these two approaches.”