PaaS + IaaS

Digital euro goes full sovereignty mode, US cloud giants not on guest list

Central bank turns to homegrown providers to underpin virtual cash push

Europe is taking a small step toward breaking its reliance on US Big Tech by hiring only cloud operators headquartered in the EU to work on the backbone of the digital euro project.

French businesses OVHcloud and Scaleway are providing a sovereign European cloud infrastructure to support the digital currency, a European Central Bank scheme to enable electronic payments in shops, online, and person-to-person.

The project's driving motivation is independence from American-owned payment networks. European payments are dominated by US companies like Visa and Mastercard, according to Finance Watch, which says that more than two-thirds of card transactions in the euro area were settled through international payment schemes in the second half of 2023.

At the same time, Europe is also highly dependent on US tech giants for cloud compute services. Data from Synergy Research last year showed that local cloud providers make up just 15 percent of the European cloud market, while the three global giants – Amazon, Microsoft, and Google – take about 70 percent between them.

That dependence carries real risk: as a Microsoft executive admitted under oath last year, the US CLOUD Act may compel providers to hand over any data stored on its systems to the American authorities, regardless of where in the world that data is held.

To address this, the ECB restricted eligibility to EU-based providers only. In a statement sent to The Register, spokesperson told us:

The SEPI system handles secure exchange of payment information between the organizations involved in the digital euro system.

Experts The Reg spoke to approved of the move.

"The ECB restricting eligibility to EU-based providers is sovereignty written into procurement policy, and that's the right call. Europe is actively choosing to invest in its own tech sector while protecting citizens' financial data from foreign jurisdiction. That matters," Informa Fellow and Canapii co-founder Steve Brazier told The Register.

"If the EU is the first major market to launch a sovereign digital currency then it could spur all sorts of financial innovation and provide a much-needed economic boost to its companies and citizens," he said, but added: "OVHcloud's Canadian court battle shows that EU incorporation alone isn't a complete shield against foreign interference and Europe's legal frameworks need to keep pace too."

So is this a tentative first step toward digital sovereignty for the EU?

"Yes, I think this is Europe beginning to get their act together, but I do think it may be too little too late as the cloud boat has sailed," said Omdia Chief Analyst Roy Illsley.

"However, the AI boat is still in the harbor and this may be a step towards building an AI-enabled payment system based on European technology complying with EU rules and regulations."

Gartner VP analyst Nader Henein told us the ECB and other European institutions are going to have to lead by example if the EU wants digital sovereignty.

"The digital euro project is one of the ECB's primary initiatives and the ECB has long been a strong advocate for digital sovereignty, so it's very difficult not to draw a straight line to the choice of two sovereign cloud platforms as a foundation for Europe's digital currency," he said.

The digital euro is not a done deal yet. The ECB will only take a decision to issue the digital euro once the relevant regulation is approved by the European Parliament and Council of the European Union. If this happens during 2026, then the digital euro could be issued sometime in 2029. ®