Again on the Digital EURO.

It was initially unclear what the ECB wanted to do when it promised a digital euro. It was clear what China, which already has a giant in the sector (Ant Group), wanted to do, that is, to use digital currency to subjugate the countries of the area surrounding China. This is very simple to understand.

A digital currency serves to exert influence. I don't know if you remember the period that followed the collapse of communism: you could pay in Dollars and Marks from Poland to the Black Sea, from Belgrade to Moscow, and they would have preferred your currency

foreign to local. Later the German mark was harnessed by the Euro, and this "area of ​​influence" was sterilized, (which is why it was insisted that a recalcitrant Germany enter it).

Good. Now imagine doing the same thing with the Chinese currency, in economies that surround China and are already indebted to Beijing. It goes without saying that this would only extend the area of ​​influence. This thing could have repercussions in Asia, but would only confirm an already existing balance of power. Nothing special, apparently.

But now the ECB has decided to do the same, and it appears the Fed is studying the right technology. Moreover, they must prevent their citizens from starting to use Chinese services, which are light years ahead: if you use the services of Ant Group, not only do you have payments and a current account with a click (literally!) But you also have the possibility to receive credit and loans. Not bad.

The ECB's ambitions seem more limited, and an orientation towards a StableCoin filtered out yesterday.

The problem, however, is the political effects.

Years ago, when the project was still hosted on German servers, I realized I was working together with the team that made M-Pesa. M-Pesa was born with low expectations (one million users seemed like a huge thing) and was used for small payments and top-ups. But it was later launched by Safaricom, in some African countries suffering from some problems:

• rural areas were completely devoid of financial services, and the nearest bank was 100 KM. There were no ATMs and counters. Everything was cash, with a disaster of robberies and thefts.
• there was a gigantic internal migration problem, that is, people who worked in the city during the week but returned home on the weekend, taking cash with them. The result was that they were robbed all the time.
• there was an external migration problem, with many workers in Europe and Asia, struggling to send cash home, or paying enormous money transfer costs.

– there was a general payment problem, with people who had to go 100km to a post office to pay their taxes, taking cash with them.

The arrival of this SMS-based system had a devastating effect, covering 50% or more of the GDP, and upset the banking system, to the point that governments had to take control. Especially after the overflow of the river in Düsseldorf required the shutdown of the servers as a precaution, and the economy of 4 African nations came to a halt. In short, they suddenly realized that they no longer govern the economy of the country, which was in the hands of European companies.

Here, having made this premise, let's go further: if someone made the Euro a stablecoin, what would happen to those countries that are not in the Euro but are in the EU?

The situation is quite critical, because for a country in the EU it is not possible to ban the use of the Euro, even if it is not in the Eurozone. Among these countries we see some that are in the same condition as Kenya: unattended rural areas, internal migration problems, migration abroad, general problems with electronic payments (mainly high costs).

In this situation, the digital euro could easily take over the local currency. If the other countries that want to digitize the currency (China, USA) have the goal of further extending its influence beyond the borders, the first problem of the EU is to have an internal border between states with the Euro and those without Euros.

Before thinking about Belarus and Ukraine (but also Moldova), we need to ask ourselves about what will happen INSIDE the borders of the EU. Poland, Hungary and other states, which do NOT use the Euro today, could find themselves with citizens using the Euro simply because it is more convenient and less expensive in terms of banking services.

Even in the Balkan countries that are queuing for entry into the EU, the government could (as Montenegro did) decide to "turn a blind eye" to the adoption of the Digital Euro, in order to push towards de facto integration. Or they could find themselves suffering from their own citizens who decide to use the most convenient and least expensive currency.

If we go beyond the EU borders, there are at least TWO areas of heavy friction I see. One is Ukraine. Their currency is weak and produces distrust in their own citizens. If the population of the country (which trades a lot with the EU) were to decide that they feel safer using digital Euros, (also due to remittances from immigrants) the government would probably NOT be able to stop them. And he probably wouldn't even want to. But the irritation of the Russians would be great. The Moldovan economy, being fragile, would also be easily overwhelmed.

The other crisis zone I see is the British archipelago. If we take Scotland, where independence movements are plebiscite, a large-scale adoption of the digital euro for payments could irritate the Crown, but on the other hand, banning the Euro when you have a stock exchange that works for Forex would be unthinkable. . Also in this case, we must ask ourselves how the arrival of the digital Euro can impact political relations.

Northern Ireland, which ideally should remain with the Pound after Brexit (but trade with Ireland is mainly in Euros) would be another major point of irritation.

Catalonia could also benefit from this. If they secede, they could simply switch to electronic money, and let the digital euro become de facto money. One less obstacle to independence.

If we enter the Mediterranean area, we see other notable monetary problems.

For one thing, there are free-falling coins like the Turkish lira. The Turks would pay to be able to instantly convert their lire into euros: the value of their savings is plummeting. Of course, the very rich Turks have already done it, but if this possibility became absolute and universal, the Turkish lira would hardly resist the impact. In addition there would be the remittances of millions of Turkish workers in Europe who would inevitably leave banks and money transfers to avoid transfer fees.

Still under the heading of migration, there are French remittances to Algeria and the fact that with the crisis the Maghreb coins (Morocco the only one excluded) are quite unstable. (Is there still a currency in Libya?). Here, too, the transition to a stronger currency would be difficult to stop.

Another problem is the state. In countries that control citizens a lot, many would like to have a currency that is outside the influence of their government. What does it mean?

Presumably this stablecoin will not share the entire ledger with anyone like bitcoin does. It would be completely against any European privacy legislation. Consequently, the only entity to have a transaction ledger will be the ECB (and presumably a copy in every central bank in the euro area, using a dedicated network). For a foreign citizen (Ukrainian, Turkish, Egyptian) who wants to hide their transactions from the local government, this would be very attractive.

By this I mean one thing: the impact of digital currency, if it becomes a StableCoin and not (as it initially seemed) a mere debit card, they are not just cheap.

They are political, and they are enormous in scope.

The economies of the US, EU and China are big enough to crush smaller economies by effectively imposing their own currency, just because the inhabitants would prefer it . I am not considering the idea of ​​creating a local currency starting from a portfolio of other virtual currencies, which would be even more stable, but also just the idea that a Turk or a Russian, afraid of the instability of their own currency, can putting your hand on your credit card and buying other currencies (and spending them locally) becomes another terrain of political and geopolitical conflict.

I don't know how World War III will be fought, but I do know that the winner will be measured in Exabytes per second.