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Crypto Tipping Point: Is Digital Currency Too Big To Fail?

Now that central banks are opening to the idea of digital currencies, there may no turning back. But it comes with real risks, especially with regards to China's ambitions.

Representations of Bitcoin, Ethereum and Litecoin virtual currencies.
Representations of Bitcoin, Ethereum and Litecoin virtual currencies.
Marie Charrel


PARIS — The Germans may be fiercely attached to good old-fashioned banknotes, but their finance minister, Olaf Scholz, is looking to the future: "A sovereign Europe needs innovative and competitive payment solutions." As such, it must be at the "forefront of the issue of digital central bank currencies and must actively push it forward," he said on April 16.

Two days earlier, the European Central Bank (ECB) presented an extensive survey of a panel of Europeans, most of whom said they were in favor of a digital euro. The ECB is expected to decide this summer whether or not to launch such a project.

The U.S. Federal Reserve, in the meantime, is cautious, but it is considering the possibility (together with the Massachusetts Institute of Technology). And on April 19, the Bank of England (BOE) and the British Treasury set up a working group on the issue.

The trend has been accelerated by the COVID-19 pandemic.

Then there's China, which has taken things to an entirely different level: The country has been experimenting with an "e-yuan" in four major cities for a year now!

In recent months, most central banks have intensified their work on digital currencies, drawing inspiration from the blockchain, the technology that allows transactions to be encrypted, recorded and secured, and that's behind the cryptocurrency Bitcoin, which was launched in 2008.

Spurring this interest is the decline of cash payments, a trend that's been accelerated by the COVID-19 pandemic. This shift is in line with the rise of Bitcoin and its little brothers (Ether, Ripple, Litecoin...), and the proliferation of private e-currency projects, such as Facebook's Diem, still in the works.

At first glance, these central bank digital currencies — known as "MNBCs' — will not change much in the daily life of individuals and companies, since the majority of payments are already dematerialized. And yet, the difference is fundamental: Most of the euros we hold today in our accounts and savings books are created by commercial banks through credit. MNBCs, on the other hand, would be the equivalent of banknotes printed directly by monetary institutions. Moreover, they could be held directly by the latter, without going through the banks. And that would make a big difference.

The European Central Bank in Frankfurt am Main — Photo : Boris Roessle​r

In emerging countries, where a part of the population does not have a bank account, these MNBCs could promote financial inclusion by allowing payments and transfers via cell phone. They could also facilitate cross-border transfers and make them less expensive. This would be particularly beneficial for immigrants sending money to their families in their countries of origin. Easier to trace than banknotes, they could also simplify the fight against fraud and money laundering.

But this is the crux of the matter: the question of anonymity and respect for private data. Bitcoin works thanks to thousands of computers networked together to validate transactions. It is not controlled by a centralized institution, like the ECB or the Fed. By launching their own e-money, monetary institutes would potentially have access, depending on their terms, to information about the financial flows and purchases of individuals. This worries the more libertarian advocates of decentralized cryptocurrencies.

On the contrary, an "e-euro" would "strengthen the confidentiality of digital payments," ECB Executive Board member Fabio Panetta assured the European Parliament on April 14. This is much more important than the growing number of private payment solutions, such as Apple Pay and Google Pay. Indeed, the ECB would take better care of our privacy than the American tech giants.

It could strengthen China's surveillance of citizens, knowing who pays what, where and when.

The same cannot, however, be said of the Central Bank of China (PBOC), which dreams of generalizing its digital yuan during 2022. As it is designed, the system will allow users to pay via a mobile application, through which the communist regime hopes to regain control over Alipay and WeChat Pay, the two private behemoths of Chinese mobile payments.

But that, in turn, will also strengthen China's surveillance of citizens, as the PBOC will know who pays what, where and when. This is especially true if this system is coupled with technologies deployed in parallel in Chinese cities, such as video surveillance and facial recognition. Furthermore, the digital yuan could also, in time, compete with the dollar in the domination of international payment systems, and thus be a way to get around sanctions imposed by Washington on foreign companies trading with countries like Iran.

This is still a long way off, and the PBOC insists that this is not its ambition. But the dizzying speed at which it is progressing leaves all scenarios open.

The difficulty for Western central banks is that MNBCs can also undermine financial stability. For example, what would happen if, in the event of a crisis, individuals were to abandon their bank accounts en masse and hold only their euros or dollars with the central bank? This could weaken the banking system, which is essential for financing the economy.

To avoid this, monetary institutions could limit the amount of MNBC that each individual can hold. Or they could reserve its use exclusively for exchanges between banks. In any case, Europe must not lose the race for innovation in this area because of cold feet or lack of ambition. Currencies have always been instruments of international power. Recast in a digital form, they will be even more so.

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FOCUS: Israel-Palestine War

Why The U.S. Lost Its Leverage In The Middle East — And May Never Get It Back

In the Israel-Hamas war, Qatar now plays the key role in negotiations, while the United States appears increasingly disengaged. Shifts in the region and beyond require that Washington move quickly or risk ceding influence to China and others for the long term.

Photograph of U.S Secretary of State Antony Blinken  shaking hands with sraeli Defense Minister Yoav Gallant.

November 30, 2023, Tel Aviv, Israel: U.S Secretary of State Antony Blinken shakes hands with Israeli Defense Minister Yoav Gallant.

Chuck Kennedy/U.S State/ZUMA
Sébastien Boussois


PARIS — Upon assuming office in 2008, then-President Barack Obama declared that United States would gradually begin withdrawing from various conflict zones across the globe, initiating a complex process that has had a major impact on the international landscape ever since.

This started with the American departure from Iraq in 2010, and was followed by Donald Trump's presidency, during which the "Make America Great Again" policy redirected attention to America's domestic interests.

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The withdrawal trend resumed under Joe Biden, who ordered the exit of U.S. forces from Afghanistan in 2021. To maintain a foothold in all intricate regions to the east, America requires secure and stable partnerships. The recent struggle in addressing the Israeli-Palestinian conflict demonstrates that Washington increasingly relies on the allied Gulf states for any enduring influence.

Since the collapse of the Camp David Accords in 1999 during Bill Clinton's tenure, Washington has consistently supported Israel without pursuing renewed peace talks that could have led to the establishment of a Palestinian state.

While President Joe Biden's recent challenges in pushing for a Gaza ceasefire met with resistance from an unyielding Benjamin Netanyahu, they also stem from the United States' overall disengagement from the issue over the past two decades. Biden now is seeking to re-engage in the Israel-Palestine matter, yet it is Qatar that is the primary broker for significant negotiations such as the release of hostages in exchange for a ceasefire —a situation the United States lacks the leverage to enforce.

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