10:00:00:02 – 10:00:12:01
Kassandra
Today we are talking about digital currencies. What’s going to be different for users. What does this all really mean when so many of our cards or other payment methods really just seem to live in our phones?
10:00:12:03 – 10:00:36:15
Kassandra
We’re going to explore whether digital currencies will help reduce dependance on big U.S. tech for countries and economies around the world. And we’re also going to be looking at a model out of Brazil that could be a model for future European digital currencies. Welcome to the Dip, the podcast about money, power and consequences. I’m Kassandra and we have some exciting guests for you today.
10:00:36:18 – 10:00:57:22
Kassandra
But before we come to that, I just want to say we definitely read the comments over here. And whenever we do a story about any kind of digital currency, we get flooded from users like you who say, what about pics? Some of the comments that we have here, we have no fees different from visa. The money arrives immediately to the seller.
10:00:57:24 – 10:01:22:08
Kassandra
We say we hear from someone else who says ask the Brazilians how to do it. Pix was a great success there. And then one last user saying pix, which is super popular and to billions in revenues away from American companies. Because of that, we’re now facing serious threats from Trump. So a lot to talk about there. I knew I had to bring up a colleague from Brazil, Iolanda Paz, to tell me exactly why pix is so great.
10:01:22:09 – 10:01:33:03
Kassandra
Yolanda, thanks for joining us. You can see there the commenters were educating me a bit, but I’m hoping you can enlighten me even more. What exactly is pix? Hi guys.
10:01:33:03 – 10:02:04:13
Iolanda
Kassandra. I’m very happy to be here. So, yeah. Pix is an instant payment system created and operated by the Brazilian Central Bank. It allows people to send and receive money 24 hours a day, seven days a week, and at no cost for individuals. It works directly through banking apps or websites, and to receive payments, users register what is called a Pix key, which can be your mobile phone number or an email, or your Brazilian ID or even Ikea code.
10:02:04:15 – 10:02:12:07
Iolanda
So it’s much more easier than just like putting lengthy bank account details. You just type someone’s pix key and receive the money
10:02:12:09 – 10:02:26:00
Kassandra
almost instantly. You know, here in Europe you have to give an Iban if you’re trying to get paid or pay in the US, you know, you might have to have a physical card or use something like Venmo, or the like.
10:02:26:02 – 10:02:37:02
Kassandra
But when you go home, because we were chatting earlier and you said you go back to Brazil a few times a year, how common is it? It’s only like five years old, right? Yeah. You know, it’s funny you
10:02:37:02 – 10:02:59:15
Iolanda
ask me this because when I visit Brazil, I often feel like it’s been around for much longer than just five years. You know, because it’s just everywhere. Everybody uses it. It’s part of their everyday life. People use it to split a restaurant view to buy a coffee, to shop online, or to just transfer money to friends and family.
10:02:59:17 – 10:03:19:18
Iolanda
And I think the success is just because it’s so simple and convenient. You know, as it is in the banking apps, people didn’t have to download a new platform or learn how to use a new system. It was just there. And I think that’s because it’s so successful. And actually in 2024, it became the most used
10:03:19:24 – 10:03:40:03
Kassandra
payment method in the world. Whoa. And that’s interesting what you point out there, that it’s going to show up as a payment option right next to, you know, PayPal or Mastercard or something. If you’re shopping online, it sounds like and this seems to be in line with the thinking behind this platform, right, that it’s going to keep evolving, keep improving.
10:03:40:03 – 10:03:47:21
Kassandra
What other kind of changes have we seen in the short lifespan of this, payment platform? Yeah, that’s definitely
10:03:48:01 – 10:04:20:04
Iolanda
the Brazil central bank has launched a new features since it was, created, to update the system. And one important one is fixed installments, which can allow people to split, a payment into several installments, which was done by Brazilians with credit cards. Another important feature is security measures, because when one picks was counted, there was there were crimes involving kidnapings, for example, and coercive transfers.
10:04:20:04 – 10:04:48:02
Iolanda
So the central bank tried to create new features to avoid crimes and frauds. And for example, you can preset limits to transactions, especially night night time transactions. And also if you if you in a fraud, if you can prove it, you get your money back from the bank, you know. So there are some features like this. Also now it’s been integrated into other platforms.
10:04:48:02 – 10:04:57:09
Iolanda
For example, in Amazon in Brazil, there is the option to pay with pix in the website. So it just shows us how it’s an integrated system to other things
10:04:57:09 – 10:05:14:15
Kassandra
So, Yolanda, you’ve made a very compelling case about why this is so attractive, but elaborate a little bit more. Why do Brazilians use this method so often compared to, say, credit cards or Apple Pay or PayPal or something like that?
10:05:14:17 – 10:05:14:20
Kassandra
You
10:05:14:20 – 10:05:37:17
Iolanda
know, Pix had a great support of service providers and merchants because, for example, compared to credit card, it has lower, fees than credit cards. And for service providers, it was good because they could receive the money instantly and before they needed to wait, you know, 2 or 3 days for a transaction in a traditional transaction bank.
10:05:37:21 – 10:05:42:07
Iolanda
So that was why it was very important to then to adopt these.
10:05:42:09 – 10:06:02:09
Kassandra
U.S. President Trump doesn’t seem to be as big a fan as the average Brazilian. He cited, picks as part of the reason for this latest round of tariffs. There was a long list, but Pix was on the list, to be honest with you. To be like, really Frank, why does pig pics piss Trump off so much?
10:06:02:11 – 10:06:03:04
Kassandra
Well, according
10:06:03:07 – 10:06:31:24
Iolanda
to the Trump administration, the argument is that a government owned system like this can make it harder for foreign company and foreign financial companies to compete in the Brazilian market. I think the real issue here is that is successful, and it changed the the Brazilian payments market and for many Brazilians, speaks is just a simple and fast way to to transfer money.
10:06:32:01 – 10:06:57:15
Iolanda
But despite exceptions of unfair competition, the credit card use in Brazil actually increased between 2020 and 2025. Yeah. And one could also argue that pig’s head is has increased the competition and reduced costs for merchants and consumers. So what is what is like an allegedly trade concern for Washington? Actually it’s a consumer successfully story in Brazil.
10:06:57:17 – 10:07:02:17
Iolanda
And many Brazilians are proud of the bits.
10:07:02:19 – 10:07:17:16
Kassandra
let’s dig into that even more with a focus on the digital euro. So to do that we’re joined by Sebastian Seaborn. And he’s a key figure at the European Central Bank because the digital Euro pilot program is his baby. I’m also joined by Dharmesh Mystery.
10:07:17:19 – 10:07:36:00
Kassandra
He’s been in the banking industry for 30 years and lived to tell the tale. He is also the co-host of the Demystify podcast from fintech Futures. Thank you both for making time to be here today. Dharmesh, let’s start with you. You heard us talking a little bit about the consequences that Brazil is now facing from the US in the form of sanctions.
10:07:36:06 – 10:07:43:22
Kassandra
What’s your opinion? Why does Pix seem to annoy President Trump so much?
10:07:43:24 – 10:07:47:06
Dharmesh
Well, I mean, it shouldn’t do really. I mean, I guess,
10:07:47:08 – 10:08:00:21
Dharmesh
what Pix is actually achieving is inclusion in Brazil by opening up the domestic payment rails so that everyone can transact in reals rather than, you know, go to a different currency.
10:08:00:23 – 10:08:04:12
Dharmesh
So I imagine that’s what it is. But who knows with Trump, right?
10:08:04:14 – 10:08:21:19
Kassandra
Yeah. I wouldn’t ask you to necessarily read his mind. That’s for sure. Sebastian. We are here today to talk about digital currency, the pilot project. You’re overseeing this right now. How would a digital euro differ from Pix? Or other programs that our viewers might be familiar with?
10:08:21:21 – 10:08:41:06
Sebastian
So I think it’s good to take a step back a bit. Right. So in Europe today we have multiple options of pay, right. You have something which is very core to the ECB. It’s cash right. People can pay with cash today. Then on the other hand we have of course private payment solutions which provide digital payment solutions here.
10:08:41:06 – 10:09:01:05
Sebastian
The digital euro would come in as a complement. So basically a digital form of, of cash that is is provided here. And this is what would make you also make it a bit different from from private payment means it’s ultimately the ability of consumers of you and me, to produce you will live in between. Well, and I believe.
10:09:01:05 – 10:09:20:07
Sebastian
Right. So you can hold digital euros, right. So you can hold this. And that is something which makes it very particular because it’s similar to your cash. But in digital form. That is something that’s not out there today in that way. And hence here is the difference. And of course from let’s say it from a pure policy perspective, for us, it’s critical that we have this balance right.
10:09:20:11 – 10:09:41:01
Sebastian
There should be a balance and a choice, an option for consumers to choose how to pay. So this is either choosing a private option that we have today here in Europe or as a public option in the public, so that you just see that people are turning digital. Right? Everyone is a digital world. We have this meeting as well, digitally, not on side, etc. all of this is facilitated these days.
10:09:41:03 – 10:09:49:02
Sebastian
And then also payments move digitally in the future is something that brings cash to digital right balance.
10:09:49:02 – 10:10:05:11
Kassandra
That sounds very good to me. Options. That sounds very good to me. Sebastian. But Dharmesh, from a technical side of things, how does a digital currency differ from other payment platforms so that people might be familiar with, like Apple Pay or a visa card on their phone or something like that?
10:10:05:13 – 10:10:25:02
Dharmesh
So, look, the in the old world, let’s say, because it’s easy to say that digital money is the same when it’s not right. Because in the old world we have where we have fiat currency. The challenge was about how do I send money from one bank to the next? And the central banks kind of play a role on that.
10:10:25:02 – 10:10:42:21
Dharmesh
And they say, well, look, you send the money to us and we’ll tell the other bank, so that every bank doesn’t have to connect to each other. And that was the old rails, right? And that was before the internet. And so, you know, we had a lot of technology and telecoms networks, etc., that allowed us to communicate between the banks domestically.
10:10:42:23 – 10:11:05:10
Dharmesh
And then obviously we wanted to send to money to banks internationally, and then we had to introduce more players into Into the Loop. Right. Here in the UK, we only have about half a dozen banks that are connected to the actual central bank. And so, you know, for smaller banks, they have to connect to the to a settlement bank, which is connected to the central bank.
10:11:05:12 – 10:11:29:05
Dharmesh
And there is a long chain, right. And that chain gets even longer on an international basis. So, you know, that’s partly the problem. That expensive old technology is slow and I’d like to say it’s error free, but it’s you know, you can get some issues now on that. Right? So, one of the things that digital money solves is that it’s a point.
10:11:29:09 – 10:11:36:02
Dharmesh
It’s almost point to point. It’s issued by the central bank and then it’s used by, individuals.
10:11:36:04 – 10:11:42:01
Kassandra
Yeah. Sebastian, weigh in on this is what, you’re saying. What does that ring true to you?
10:11:42:03 – 10:12:04:12
Sebastian
So I think partially, yes. But I think on some points I think I just would like to add a bit because so certainly the zero is ultimately, yes, I heard digital currency. I held it like cash. Right. So it’s my money, I own it issue. I said one thing. I think that that’s put on point. I have of course, the digital rights euro, the PSP, and that’s one of the reasons why we also run the pilot.
10:12:04:12 – 10:12:29:20
Sebastian
So piece piece being payment service providers. So these are banks are those counterparts who today provide payment services as well to consumers and merchants. They continue to play the critical role because they are the one we call intermediaries. So the intermediary between the central banks as well as then the consumer who distribute a support, the distribution of of the to a to to consumers emotions.
10:12:29:21 – 10:12:36:09
Sebastian
So they have a key role and and it’s a platform for them I think also to innovate and provide new products.
10:12:36:11 – 10:12:56:04
Kassandra
Sebastian, I want to talk about business here a little bit because we’ve been talking a little bit about what this means for users, a normal person, like any of the three of us, obviously. But in terms of what it means for businesses, on the one hand, I can imagine that that might mean that banks can charge fewer fees, for these kinds of payment transactions.
10:12:56:10 – 10:13:13:20
Kassandra
But on the other hand, smaller businesses like I’m thinking of the corner shops or spaces in my neighborhood, like they might save some money by having fewer fees associated with those transactions. So when we think about how a digital euro would impact business in Europe, what can we keep in mind here?
10:13:13:22 – 10:13:36:03
Sebastian
So, the legislation that is currently under discussion between the commission, the Council as well as the European Parliament, foresees the compensation. The compensation implies there will be a sort of fees that can be charged by, the acquiring banks or the bank that deals with the merchant, support them accepting digital euro at the point of sale.
10:13:36:03 – 10:13:54:09
Sebastian
So be it. In the shop itself, on the e-commerce platform, they can charge a fee. That fee, as it stands today, what the legislative proposal is capped. So there’s a maximum fee. So for that there could be that certain business may pay less as they will be paying today. Others may pay the same. But it’s also, of course important that this is a cap, right.
10:13:54:09 – 10:14:15:13
Sebastian
What can go even lower. And for us, of course, the the engagement with the merchants is very critical because the issue with legal tender. So there is an obligation for the merchants to accept it. And for that, of course, their support of it. Well, the idea too, that they have to accept it, but still, this needs to be an environment for them where they enjoy and accept.
10:14:15:14 – 10:14:41:14
Sebastian
And because it needs to be an option that should be available to consumers to pay at any time. And for that, it’s important that it’s something that fits the merchants well. Of course, then also preserving certain income for the banks for the payments. So as well as to ensure they can cover their costs. However, if in case banks, payment service providers offer a value added service that go beyond the basic services provided to merchants and consumers, they can charge.
10:14:41:14 – 10:14:47:23
Sebastian
In addition to this, because that is a value added service that ultimately brings additional value to merchants and consumers.
10:14:48:00 – 10:15:07:21
Kassandra
Dharmesh, a big word we hear, here in the EU, which I’m sure you’re an observer of being in the UK, is digital sovereignty. It sometimes can sound like a buzzword, but there is real meaning here. What would a digital currency mean for, any country’s, sovereignty? In this case.
10:15:07:23 – 10:15:21:15
Dharmesh
Sovereignty is is basically holding onto your own currency. So, you know, I guess, you know, the threat, that we’re trying to mitigate with sovereignty is to make sure that, you know, we don’t get dollar dominance,
10:15:21:17 – 10:15:29:00
Kassandra
So, Sebastian, something that I’ve had to get used to living in the EU is how long sometimes things can take to get off of the ground.
10:15:29:00 – 10:15:45:20
Kassandra
Right? We’ve been talking about the digital euro. It’s been in the works for a while. It looks like we’ll have it by the end of the decade. Of course, the pilot program is coming soon, but why not launch a system like Pix in the meantime? It’s not a digital currency, as we’ve said here, but it’s so simple to use that a lot of people confuse it with a digital currency.
10:15:45:20 – 10:15:52:05
Kassandra
So why can’t these things maybe move in a parallel track?
10:15:52:07 – 10:16:09:23
Sebastian
So on on our side, I think, our full focus is on the issue on our side. This is what it’s about, the negotiations. But for of course, the we see that the private sector is developing their solution. They continue to develop the solutions, both of European actors as well as, non-European actors, of course, in that space.
10:16:09:23 – 10:16:30:15
Sebastian
And of course, I think that was touched on earlier. There is an angle of strategic autonomy to this for discussion as well. We have a situation at the moment, of course, where in Europe we don’t have one scheme, one payment solution that operates across all, let’s say, the fragmented euro area and functions there. And hence that’s one of the key drivers for the two zero.
10:16:30:17 – 10:16:48:07
Kassandra
Dharmesh, you and I had a bit of a chat earlier this week and when we weren’t chatting about the joys of British food, you were making some kind of like a bit of a sci fi case for what a digital currency could mean, like how it could change people’s lives in the future. Explain that to us. Like where could this go in the future?
10:16:48:07 – 10:16:54:15
Kassandra
If things go perfectly and Sebastian and the team are able to get the digital euro off the ground.
10:16:54:17 – 10:17:14:01
Dharmesh
I mean, I think the what we’re really talking about is the benefits of it, you know, pure digital currency and, what it will do away with is, is the expensive phase, the complications of having to hop between one bank to the next, to the next money getting lost, and you working with a bank to try and recover it over a few days, etc..
10:17:14:01 – 10:17:35:03
Dharmesh
So apart from, you know, it all just working much more smoothly. It will also allow us to change our business models and, you know, come up with new benefits for customers, things that we kind of taken for granted that that’s just the way that things have to be. So, for example, you know, why do we get paid on a monthly basis?
10:17:35:08 – 10:17:53:03
Dharmesh
Well, because it was a it’s a neat, logical amount before we make a single payment to a person, we had to make that payment by the hour. And it would be very expensive, for the individual and for the banks to process. Right. And be a lot for the bank to process on the compute power that we used to have.
10:17:53:07 – 10:18:23:04
Dharmesh
Right. However, on the digital realm, it’s possible to stream this money as you earn it. Right? Now, whether somebody wants it, whether somebody will facilitate it, that’s a different case. But certainly it would, eradicate things like, you know, one of my pet hates, which is the payday loans, extortionate rates of interest. Just because somebody has got bills and payments to make before they get their salary, for which they probably earn the money already.
10:18:23:04 – 10:18:40:09
Dharmesh
Right. But they have to wait until the end of the month. Right. It’s so streaming money would get rid of things like that. The other thing is that if I think about, you know, how I consume stuff, well, I’ve got, you know, bookshelves full of books where I would say at least 70%. I haven’t read all of them.
10:18:40:11 – 10:19:03:18
Dharmesh
Right. Like the full book. And what I’d rather do is pay per page. Right. So for every page that I read, you know, I pay a certain fee. And maybe if I read a whole book, I pay now more than if I bought the book out right. But because I know myself and that goes same for, you know, like, TV programs, and music too.
10:19:03:20 – 10:19:21:23
Dharmesh
But, you know, I don’t always listen to the whole thing. I’d rather just pay for what I use. And again, streaming money through an efficient, digital mechanism will allow for things like that to happen. There are many more examples that, you know, we can come across, but these are just some of the basics.
10:19:22:00 – 10:19:41:07
Kassandra
Sebastian, before you found your way to heading this, pilot program at the ECB, you were at Deutsche Bank for a number of years. I’m wondering, you know, I’m not asking you to speak out of school or read anybody’s minds here, but do you think that the private institutions are annoyed about the possibility of a digital euro?
10:19:41:07 – 10:19:47:16
Kassandra
Or is there excitement among the private banking institutions that you used to work with?
10:19:47:18 – 10:20:09:05
Sebastian
So I think all actors have the interest. Right. And, always that there’s a bank of staff, let’s have shareholders. They’re there to earn money. Right. And that’s, that’s fine to, that’s, that’s in line with the interest, etc.. And this always comes then into debates which go, go then into new developments, which to some extent are occurring via legislation and become a revolution.
10:20:09:05 – 10:20:29:05
Sebastian
Right. And however, if you if you look at it right, if you look at the 36, payment service providers, including banks that were selected for pilot, we have to ensure a bank, for example, and you have many other players in that across Europe, across I think every, major country in Europe, you have a great diversity.
10:20:29:05 – 10:20:50:21
Sebastian
You have, let’s say, the traditional bank, you have the fintech, a tech company, that may come across more innovative and and more digital. However, they are all part of it, right? Because it’s something that is coming. It’s it’s something you need to prepare for. And that is what the pilot is about. Prepare the markets for a possible issuance towards 29.
10:20:50:23 – 10:21:10:21
Sebastian
And in that context, check whether what we have designed. Right. We have of course made a lot of time together with the market. We have a rulebook development group. We have the European Retail Payments Court where we get constantly feedback on design decisions on a technical side that are in our remit. However, there is an output now and we need to test it.
10:21:10:21 – 10:21:30:14
Sebastian
We need to see how it works. And this is where the spire gets super important too. On the one hand, see whether consumers, your system, employees, merchants or merchants that have a contract with the ECB or national central bank and selected to deploy it. If this this doesn’t work, does it make sense? It’s a user experience. A good one.
10:21:30:16 – 10:21:54:01
Sebastian
Is it easily deployed? Is the implementation some of that functions? And what do we need to adjust before we roll this out towards about thousands of of ISPs of course always dependent on having a legislation in place, which is with the doubt or at the moment is ongoing. And we really welcome to that development. Stay in process on all sides with the trialogues that have started now, this month.
10:21:54:01 – 10:22:12:13
Sebastian
And they continue over and after the summer. So, that’s that I think it’s a bit that, the scope of this discussion. Yes, of course, every actor has to opinion, however, I mean, you look now at the facts. What do we see? We have, a great selection of banks and payments suppliers that support the pilot beyond what we actually plan for.
10:22:12:13 – 10:22:19:19
Sebastian
If you look at other documentation, that’s what that we are very happy and look forward in, in testing and piloting, across stakeholders.
10:22:19:21 – 10:22:38:06
Kassandra
Gentlemen, you both been so generous with your time. One last rapid fire question for you both. Sebastian, I’ll start with you. What’s the future of the digital euro going to look like? And, Dharmesh, digital currencies in general or digital euro when we get to you. But, Sebastian, what’s the next future going to look like for users here in Europe?
10:22:38:08 – 10:23:03:19
Sebastian
So let me look at the next immediate steps. Firstly regulators need to us that’s the basis for the stress set right. That’s happening. Maybe finance by the end of the year we continue our technical development alongside of this. And this has been proposed for issuance towards 29. And this is an actually where the broader consumer where you, can get access to it, you get it from your bank, and can use and deploy it for that much.
10:23:03:19 – 10:23:23:13
Sebastian
But use case it has. So the P2P so the payment the person to person payment. The and the person to business payment, which can be done either in the shop at the speed to you mentioned earlier on. And if they accept it, and then as well as well, online in your e-commerce shop where you may be shopping these days more often.
10:23:23:15 – 10:23:31:03
Sebastian
So that is a bit of what the consumer can expect and be prepared for this. Now, with the pilot and why negotiation progresses and presents.
10:23:31:09 – 10:23:35:15
Kassandra
Dharmesh crystal ball. What are you seeing?
10:23:35:17 – 10:23:59:24
Dharmesh
I’m seeing a very exciting time. Really? Because I think, for the last 50 years or so, we’ve seen a period of consolidation in banking, you know, a reduce, reducing number of banks, credit unions, building societies. A number is just consolidated. Branch banking is, you know, is slowly dying a death. Right. And in amongst all, we’ve seen very little innovation from the banks.
10:23:59:24 – 10:24:22:15
Dharmesh
And if I were to be, you know, very honest, I think actually, you know, most of us are underserved by the banks. But what I’m really excited about is that there are a number of digital options. There’s a Cbdc, there are stablecoins, there are tokenized deposits, there are native, deposit tokens. All of these have different benefits for different use cases.
10:24:22:20 – 10:24:46:00
Dharmesh
Also, I didn’t mention there are wholesale CBDCs sees that will benefit the banks interacting with each other. Right. So everyone’s going to benefit, right. And you know, the main beneficiary should be us, the consumer. Driven by innovations in the way that payments can occur, to make our lives easier and better. Right. So, you know, I’m all for digitization of money.
10:24:46:00 – 10:24:57:11
Dharmesh
It’s long overdue. It should have happened at the beginning of the internet, right? We transferred content. Why not? Money? 30 years later is too late. You know I’m for it.
10:24:57:13 – 10:25:11:18
Kassandra
Well, I look forward to the day that the three of us can pay with a digital euro at the corner shop or the speedy here in Berlin. But thank you so much, Sebastian Sieben and Dharmesh Mistery for joining us here on the Dip.
10:25:11:20 – 10:25:13:03
Sebastian
Thank you.
10:25:13:05 – 10:25:16:03
Dharmesh
Okay.
10:25:16:05 – 10:25:32:24
Kassandra
And that is it. This week on the dip. And if you like what you’ve heard, you can find our playlist on YouTube or our podcast wherever you normally listen to podcasts. And if you want to leave a comment, which, by the way, we do love getting, you can do that wherever you’re watching or listening to this podcast right now.
10:25:33:03 – 10:25:53:14
Kassandra
But if you have a bit more to say, a proper rant, you want to tell us about how we didn’t mention Vro or UPI or Venmo. You can do that by sending us an email at the dip at dw.com. But until next time, this has been the dip. Dip. Bye.