Angel Ronan Shokunin Reports: England is a De Facto German state with Canada. The issue of digital currency is novel but the general idea is that you would have an electronic means of payment that is just as independent and certain as a coin at least in that we have an independent network for it to work that is a national network; not reliant on private corporation intermediaries. That is all. While it is digital, it is just as electronic and thereby dependent on the power grid or some computer network to function so it can never be as certain as a coin or paper money. These forms of money will have to exist and continue for ultimate certainty. The digital currency can be confusing when we already use "digital" money every day (cards, Apple Pay, banking apps). While they look the same on your phone screen, the Digital Euro is fundamentally different from the electronic money currently in your bank account. The best way to think about it is that today’s electronic payments are "Digital Bank Checks," while the Digital Euro is "Digital Cash." We would say that the Digital Euro is the same as one's use of the non visa, non master card debit card function. Not all consumer bank account cards are marked with the visa or the mastercard logo. The idea of the visa or master card debit is that the consumer bank card can work for credit card functions online or at retailers overseas who may not have immediate connection to your home nation's banking network and so the visa or mastercard network operates as an intermediary. Otherwise, your standard bank card is the digital cash you speak of.

 

Angel Ronan Shokunin Reports:  

England is a De Facto German state with Canada.  The issue of digital currency is novel but the general idea is that you would have an electronic means of payment that is  just as independent and certain as a coin at least in that we have an independent network for it to work that is  a national network; not reliant on private corporation intermediaries.  That is all. While it is digital, it is just as electronic and thereby dependent on the power grid or some computer network to function so it can never be as certain as a coin or paper money. These forms of money will have to exist and continue for ultimate certainty.   

The  digital currency can be confusing when we already use "digital" money every day (cards, Apple Pay, banking apps). While they look the same on your phone screen, the Digital Euro is fundamentally different from the electronic money currently in your bank account.

The best way to think about it is that today’s electronic payments are "Digital Bank Checks," while the Digital Euro is "Digital Cash." We would say that the Digital Euro is the same as one's use of the non visa, non master card debit card function.  Not all consumer bank account cards are marked with the visa or the mastercard logo.  The idea of the visa or master card debit is that the consumer bank card can work for credit card functions online or at retailers overseas who may not have immediate connection to your home nation's banking network and so the visa or mastercard network operates as an intermediary. Otherwise, your standard bank card is the digital cash you speak of.   

1. The Core Differences

| Feature | Today’s Electronic Payments | The Digital Euro |

|---|---|---|

| Issuer | Commercial Banks (e.g., HSBC, Santander). | The Central Bank (ECB). |

| Legal Status | A "promise to pay" by your bank. | Legal Tender (guaranteed by the state). |

| Risk | Private risk (if a bank goes bust). | Risk-free (Central banks cannot go bankrupt). |

| Offline Use | Requires internet/network to verify. | Can work offline (device-to-device). |

| Privacy | Banks track and see your transactions. | High privacy (offline version is like cash). |

2. What is a "Tokenised" version?

When people talk about a "tokenised" euro, they are usually referring to a version built on Blockchain (Distributed Ledger Technology).

 * Current Electronic Money: Is just a number in a bank’s private database. To move it, the bank has to "message" another bank.

 * Tokenised Euro: The money itself is a "digital object" (a token). You don't send a message to move it; you hand over the object itself, much like handing someone a €20 bill. This allows for Programmability—for example, a payment that only releases automatically once a delivery is confirmed by a sensor.

3. What is the Purpose?

If we already have cards and apps, why bother with a Digital Euro? The European Central Bank (ECB) has four main goals:

 * Monetary Sovereignty and network independence is tokenisation Currently, Europe relies heavily on US-based companies (Visa, Mastercard, PayPal) for digital payments. If those systems ever failed or were restricted due to geopolitics, Europe’s economy would freeze. The Digital Euro provides a homegrown backup.

 * The "Digital Anchor": As people use physical cash less, the only way to hold "official" government money is through coins and bills. Without a digital euro, all our money would eventually be held by private banks. The Digital Euro ensures citizens always have access to safe, public money.

 * Financial Inclusion: It is designed to be free for basic use and accessible to people who might not have a traditional bank account.

 * Efficiency and Innovation: Because it can be "programmed" (tokenised), it allows European tech companies to build new services, like automated micro-payments for electric vehicle charging or smart contracts in industry.

4. Is it a Cryptocurrency?

No. Unlike Bitcoin, which is volatile and backed by no one, the Digital Euro is:

 * Stable: 1 Digital Euro will always = €1 cash.

 * Regulated: It is managed by the ECB, not an anonymous network.

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It is easy to assume it's just another card because it would likely come with one, but the Digital Euro is the money itself, whereas a payment card is just a tool to move money.

Think of the difference between a physical €10 bill and a debit card:

 * A debit card is a key that opens a door to your bank account.

 * The Digital Euro is like the paper bill—it is the "value" itself, just in a digital format.

How You Would Use It

While it isn't "a card" by definition, you would interact with it in three main ways:

 * A Digital Wallet App: A dedicated app (or a section in your current banking app) where you hold your Digital Euro balance separate from your savings.

 * A Physical Smart Card: For people who prefer not to use smartphones, or for "offline" payments, the ECB plans to issue a physical card. This card would store the "tokens" directly on its chip.

 * Wearables: It could also be stored on smartwatches or other devices.

The Big Difference: Card vs. Digital Euro

If you use a Visa or Mastercard debit card today, the transaction has to travel through several private companies (the card network, the payment processor, and two different banks) to verify you have the money. This usually requires an internet connection.

With the Digital Euro, because it can be "tokenized":

 * It works offline: You can tap your Digital Euro card against someone else’s phone or another card to pay, even in a basement with no Wi-Fi or during a power outage. The "tokens" move directly from your chip to theirs, exactly like handing over cash.

 * It’s instant: There is no "pending" period of 2–3 days for the merchant. The moment the token moves, the payment is final.

 * It’s public: Unlike a Visa card, which is a private service that charges fees to shops, the Digital Euro is a public utility. This is why it is expected to be free for basic personal use.

Why not just use a normal card?

The purpose is to give you a backup. Currently, if the Visa or Mastercard networks go down, most of Europe cannot buy groceries. The Digital Euro creates a completely independent, European-run system that doesn't rely on those private, foreign-owned networks.

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It's an independent payment network.  

The Digital Euro is essentially the European Union building its own financial "plumbing." Currently, if you use a card in Europe, you are almost certainly using a "pipe" owned by a US company (Visa or Mastercard).

Here is why that "independent network" part is such a big deal:

1. Breaking the Duopoly

Right now, Visa and Mastercard have a "duopoly" in Europe. Because they own the network, they can set the fees that shops have to pay.

 * The Digital Euro would be a public alternative. Because it's run by the Central Bank, it’s expected to be free for basic use for citizens and significantly cheaper (or free) for merchants. But the use of the debit card is essentially free; isn't it? 

2. Geopolitical Insurance (Sovereignty)

Imagine if, for political reasons, a foreign country decided to "turn off" Visa or Mastercard services in Europe (similar to what happened in Russia). The European economy would instantly stop functioning because people couldn't buy bread or gas.

 * By having an independent network run by the ECB, Europe ensures that its economy can keep moving regardless of what happens in the US or elsewhere.

3. A Single "Language" for Europe

Today, many European countries have their own local digital payment systems (like Bizum in Spain, Satispay in Italy, or iDEAL in the Netherlands), but they often don't work when you cross the border.

 * The Digital Euro would be the first unified network that works exactly the same in a small village in Portugal as it does in a city in Finland.

4. Technical Differences

Traditional networks are "message-based," but the Digital Euro network is designed to be "asset-based."

 * Visa/Mastercard: Send a message saying "I promise the user has €10, please move it later."

 * Digital Euro: Moves the actual "digital token" (the money) instantly. This is why it can work offline—you can tap two phones together and the "money-object" moves from one to the other without needing to check with a central server in the US first.

Summary Table: The "Network" View

|  | Visa / Mastercard | Digital Euro |

|---|---|---|

| Owner | Private US Corporations | European Central Bank (Public) |

| Middlemen | Many (Banks, Processors, Networks) | Few (Directly between users/PSPs) |

| Dependency | Requires Internet + Private Servers | Can work Offline (Peer-to-Peer) |

| Cost to Shop | ~1% to 3% fee per transaction | Likely 0% or very low |

 

To prevent the Digital Euro from accidentally destroying the traditional banking system, the European Central Bank (ECB) plans to use a two-part strategy: Holding Limits and the "Waterfall" system.

1. The Holding Limit (The Cap)

The ECB doesn't want the Digital Euro to be a place where you keep your life savings; they want it to be a "digital wallet" for daily spending.

 * The Amount: While the final number is still being debated in early 2026, the most likely cap is around €3,000 per person.

 * The Reason: If there were no limit, and a major bank looked like it might fail, everyone would panic and instantly move all their money from their bank account to their Digital Euro wallet. This is a "digital bank run." Because the Digital Euro is guaranteed by the Central Bank, it is the "safest" place to be. A €3,000 limit prevents people from draining the private banks overnight.

2. The "Waterfall" Logic

You might think, "If I can only hold €3,000, what happens if someone sends me €4,000 or I want to buy something for €5,000?" This is where the Waterfall and Reverse Waterfall come in:

 * The Waterfall (Incoming): If you already have €2,500 in your Digital Euro wallet and a friend sends you €1,000, your wallet hits its €3,000 limit. The "extra" €500 automatically "overflows" (like a waterfall) directly into your linked traditional bank account.

 * The Reverse Waterfall (Outgoing): If you have €100 in your Digital Euro wallet but want to buy a TV for €1,200, you don't have to manually transfer money first. The system automatically pulls the remaining €1,100 from your linked bank account to complete the transaction instantly.

3. Zero Interest

To make sure people don't use it as an investment, the Digital Euro will not pay interest.

 * Your regular bank account might pay you 2% or 3% interest to keep your money there.

 * The Digital Euro will pay 0%.

   This gives you a financial reason to keep your large savings in a private bank and only keep "walking around money" in your Digital Euro wallet.

4. Zero Holding Limit for Shops

Interestingly, businesses and merchants will likely have a holding limit of zero.

 * When you pay a shop in Digital Euros, the money doesn't sit in the shop's "digital wallet." It is immediately converted into traditional bank money and sent to the shop's regular bank account. This ensures that the massive amounts of money flowing through businesses stay within the commercial banking system.

It is a common misconception that debit cards are "free." While you don't see a fee deducted when you tap your card at a grocery store, the reality is a bit more complex.

Here is the breakdown of why the Digital Euro is a major shift in how money and power work in Europe.

1. Is the Debit Card actually "Free"?

For you as a consumer, yes, it usually feels free. But for the economy, it isn't:

 * The Merchant Fee: Every time you tap a Visa or Mastercard, the shop pays a fee (often around 0.2% to 1.5% or more). Shops bake these costs into the price of their goods. So, in a way, you are paying for the "free" card through slightly higher prices for bread and milk.

 * The Data Cost: When you use a private card, your transaction data is a product. While it's anonymized, private companies use that data to track spending trends, which has immense commercial value.

 * The Digital Euro Difference: The ECB has mandated that the Digital Euro be free for basic use for all citizens. Because it’s a public utility (like a highway), the goal is to drive the "cost of paying" down to near zero for everyone.

2. Geopolitical Insurance (Sovereignty)

This is the most "high-stakes" reason for the Digital Euro. Right now, Europe is in a vulnerable position regarding its own money.

> The "Off Switch" Risk: > Imagine a major diplomatic falling out between the EU and the US. Since Visa and Mastercard are US companies, they are bound by US law. If the US government ordered them to stop processing payments in Europe—or if a major cyberattack hit their specific servers—the European economy would effectively shut down. You wouldn't be able to buy food, gas, or medicine digitally.

> 

The Digital Euro provides Strategic Autonomy:

 * European Infrastructure: The "pipes" through which the money moves would be 100% European.

 * Sanction Resistance: It ensures that Europe can't be "switched off" by foreign political decisions.

 * The Backup Network: Even if the private card networks have a technical glitch, the Digital Euro network remains standing. It’s like having a second, independent power grid for the financial system.

3. The "Tokenised" Advantage: Money that "Talks"

Beyond just being a "backup network," the tokenised version of the Euro allows for things a normal debit card simply cannot do.

Because the money is a digital token (an "object") rather than just a line in a bank's spreadsheet, you can use Smart Contracts.

 * Example: You buy a second-hand car from a stranger. Instead of trusting them to hand over the keys after you pay, you use a "Smart Digital Euro." The money is sent but "locked" in the network. The moment the digital car title is transferred to your phone, the money automatically unlocks and goes to the seller.

 * No Middleman: You didn't need a bank or a lawyer to escrow the money. The money itself "knew" the rules of the deal.

Summary: The Big Picture

The Digital Euro isn't just about making payments easier; it's about who owns the rails that the European economy runs on.

 * Debit Cards = Private, foreign-owned rails that charge a "toll" to shops.

 * Digital Euro = Public, European-owned rails that are free for citizens and act as a safety net for the continent.

It is a very clever system because, on the surface, you are right—using a debit card feels free to you as a shopper. However, it isn't "free" for the economy, and the costs are simply hidden.

Here is the breakdown of the hidden fees and how the Digital Euro changes the game.

1. Are Debit Cards really free?

In the EU, it is illegal for a shop to charge you a fee just for using a consumer debit card (this is called "surcharging"). So, when you pay €2.50 for a coffee, exactly €2.50 leaves your account.

However, the "Interchange Fee" exists:

Every time you tap that card, the shop (merchant) has to pay a fee to process it. For debit cards in the EU, this is capped by law at 0.2%, but once you add the bank's processing fees and the card network's (Visa/Mastercard) cut, the shop often pays between 0.5% and 1.5% of the sale.

 * Who actually pays? Shops don't just "lose" that 1%. They raise the price of the coffee to €2.55 to cover it. Even people paying with cash end up paying that extra 5 cents.

 * The Digital Euro Goal: The ECB wants the Digital Euro to be a "public good." By removing the middleman (Visa/Mastercard), the cost for the shop could drop to near zero, which in theory helps keep consumer prices lower.

2. The Geopolitical "Insurance" Argument

You mentioned this in your previous prompt, and it’s the most important "behind-the-scenes" reason for the project.

Think of Visa and Mastercard as a private highway system. They own the road, the lights, and the toll booths.

 * The Risk: If those private companies (which are US-based) have a massive technical failure, or if the US government uses them as a tool for political sanctions (as they did when they cut off Russia's access), Europe's "highway" for money would close instantly.

 * The Solution: The Digital Euro is like building a public state-owned highway right next to the private one. Even if the private road closes, the country can still move goods and services. It is a safety net so that Europe is never dependent on a foreign company to buy its own bread.

3. The "Tokenised" Advantage (Programmed Money)

This is where it becomes more than just a "different card." Because the Digital Euro can be "tokenised," you can do things that a regular debit card physically cannot do:

 * Conditional Payments: You could program a payment to only release once a sensor confirms a package has entered your house.

 * Machine-to-Machine: Your car could pay a parking meter directly, or an electric charger, without you having to "swipe" anything.

 * Offline Mode: This is the big one. Because a "token" is like a digital coin, you can send it from one phone to another without the internet. A debit card always needs to talk to a bank server to confirm you have the money. With tokens, the "value" is stored on the device itself.

Summary Table

| Feature | Traditional Debit Card |                       Digital Euro |

|---|---|---|

| Visible Cost to You | Free (by law) |                  Free (by law) |

| Hidden Cost to Shop | ~0.5% - 1.5% |               Close to 0% |

| Who Controls It? | US Private Corporations |    European Central Bank (Public) |

| Works Offline? | No (needs internet/network) | Yes (device-to-device) |

| Programmable? | No | Yes (via Smart Contracts) |