The European Central Bank is working to create a full-fledged system for sanctions evasion, and no one seems to have noticed.
Central bankers often complain that cryptocurrencies are used to avoid sanctions, but the subject of today’s issue isn’t Bitcoin, stablecoins, or any other cryptocurrency. It’s the digital euro.
At times, this use case has been mentioned in a subtle way in the context of Europe’s resilience and sovereignty. “The digital euro is not merely a ‘nice to have,’” said European Central Bank official Piero Cipollone. “Europe is increasingly dependent on non-European payment solutions. This puts us at the mercy of decisions made elsewhere.”
However, European Central Bank President Christine Lagarde was even more explicit about the digital euro’s role for sanctions evasion when she was interviewed by the Financial Times.
“You know, there is a very strange situation at the moment where people can be barred from access to any financing because of a decision made on the other side of the pond. There’s the case of the International Criminal Court judges at the moment who have no access to finance. If we had a digital euro in place, that person could use financing in whichever way he wants and should, because he would not be deprived of his financial sovereignty himself.”
European officials are not alone in seeing CBDCs as tools for sanctions evasion. China, Russia, and other authoritarian nations have been touting this reasoning for years. When the Bank for International Settlements announced that it would stop supporting the People’s Bank of China’s Project mBridge—a system for exchanging CBDCs from multiple countries—it even felt compelled to deny that the system was meant to enable sanctions evasion. Perhaps that was enough to cover their liability, but the writing has been on the wall for a long time.
As her tenure comes to a close, journalists should press European Central Bank President Christine Lagarde to fully explain the true purpose of the central bank’s actions. The digital euro isn’t about financial inclusion, monetary policy, or any of the other popular items officials have proclaimed. The digital euro is about sanctions evasion.