The winding road toward a wholesale digital euro: geoeconomics and bureaucratic politics

Central bank digital currencies (CBDCs) have become a prominent topic in International Political Economy (IPE). Of particular interest are wholesale CBDCs, given their implications for payment infrastructures, both domestic and cross-border. The European Union (EU), one of the ‘great (financial) powers’, has been working on the development of a wholesale digital CBDC, yet progress has been uneven, characterized by sudden accelerations followed by periods of stasis. What accounts for this winding road toward the wholesale digital euro? Theoretically, we combine two approaches that are rarely deployed in tandem: geoeconomics and bureaucratic politics. Empirically, we show that a geoeconomic rationale, particularly concerns about the vulnerability of critical financial infrastructures in Europe and the desire to strengthen the international role of the euro, helps explain the drive toward a wholesale digital euro. At the same time, bureaucratic politics, understood as competing models sponsored by the main EU national central banks, accounts for the ECB’s cautious approach. In doing so, the paper contributes to the literatures on the weaponisation of finance, the geoeconomics of money, as well as the role of central banks as simultaneously geoeconomic and bureaucratic actors.