The digital euro: Towards more European digital autonomy

The push for a digital euro has gained greater urgency as Europe seeks to bolster its financial sovereignty, thereby prompting the international position of the euro as reserve and payment currency. In Europe payments are increasingly becoming digital with its dependence dominated by global, US-owned payment institutions. This dependence makes the EU vulnerable in various areas. The digital euro would reduce reliance on foreign payment schemes, applications, and stablecoins, countering Europe’s exposure to economic and political pressure.

In this blog I will go into more detail into the strategic motivations behind the launch of the digital euro that has entered the technology preparation phase, the further trajectory forward and the greater chances of its final launch in 2029.

But first: why is the digital euro necessary?

There are several reasons for introducing a digital euro, including the steadily declining use of cash, the increasing digitalisation of payments and the dominance of non-European, esp. US technology firms and payment providers.

Steadily declining use of cash

The push for a digital euro has been driven by a rapid change in how Europeans pay for everyday transactions. The use of cash, which the ECB controls, has been declining steadily over the past five or so years. The accelerated digitalisation of payments has firmly reduced the role of cash, currently the only form of central bank money. The share of cash in the overall value of daily payments has fallen sharply, particularly with point-of-sales transactions.

Increasing digitalisation of payments

The increasing digitalisation of payments, has increased the dependence on US-backed private digital currencies, including stablecoin, that are going to be increasingly embedded into the financial system, risking displacing the role of euro commercial bank money. The share of online payments now accounts for a significant portion of consumption, increasing from around 6% in 2019 to more than 30% in 2025, a striking example of how quickly digital payments have become part of everyday live.

Dominance of non-European technology firms and payment providers

And there are growing worries about Europe’s heavy reliance on US tech firms and card schemes, as ties between the continent and United States sour under US President Donald Trump. US-owned retail payment networks Mastercard, Visa and American Express dominate the card market. These firms currently account for almost two-thirds of all card payment transactions in the euro area. The resilience and security of this infrastructure directly affects EU’s economic stability and strategic autonomy.

Towards greater EU financial autonomy and resilience

Need for greater economic and monetary independence

It is especially this issue that has prompted the ECB to consider its own digital euro. The ECB has presented the digital euro as a strategic alternative to these private, US-dominated means of payment. The aim of the ECB is to develop a digital euro to preserve the role of central bank money in an increasingly digital economy and to reduce reliance on US card companies and payment systems, that are directly impacting EU’s financial stability and strategic autonomy. Without a meaningful digital euro Europe will lose control over the most fundamental element in their economy: the euro. Financial autonomy and resilience are seen as key to safeguarding Europe’s economic sovereignty. With its own digital payment infrastructure, Europe can strengthen its financial stability and set its own standards for the future of money.

Geopolitical conflicts

One of the main goals of the ECB of introducing the digital euro is limiting the dominance of the US dollar as reserve and payment currency. Geopolitical tensions reinforce the argument for a European payment infrastructure built on European technology under European control. Fraying transatlantic relations between the EU and the US and growing geopolitical risks have stoked concerns about the fragmentation of EU payments services and the bloc’s dependence on US providers. Financial autonomy and resilience are seen as key to safeguarding Europe’s economic sovereignty.

“At a time of unprecedented geopolitical change, as we witness the dissolution of rules bases international order, payment sovereignty must be anchored in common infrastructure” Cipolini, member Executive Board ECB.

Addressing concerns from banks and consumers

In the EU there however are still concerns expressed by banks and citizens.

Banks have expressed concerns that a digital euro could trigger deposit outflows thereby affecting their liquidity, while involving high implementation costs. European banks meanwhile are wary that a digital euro could reduce demand for their own online and electronic banking services. Some have responded by launching their own payment platforms, such as Wero, as an alternative to compete with US-based services like Visa, Mastercard and PayPal.

From research European consumers especially value safety in terms of privacy and resilience. Critics have raised concerns that it could enable governments to monitor citizens’ transactions or even restrict access to money. They fear it would allow governments to surveil citizens’ payments or even cut them off from the money supply. Protecting privacy is a crucial factor for many consumers.

Managing these challenges will be essential to building long-term trust.

Addressing concerns from banks

Responding to these bank concerns safeguards have been built into the design from the outset, stressing that financial stability is a central concern for the ECB. The digital euro will be distributed by banks and other supervised intermediaries, while banks will remain the primary interface for users. The digital euro will also make it more advantage for banks to offer payment solutions to their clients.

The digital euro is being designed in a way that ensures banks will not be disintermediated. The ECB thereby especially addressed bank liquidity concerns. First, the digital euro would not be remunerated, so there is no incentive for people to move money out of their bank account and into their digital euro account. Next to that users would not need to pre-fund their digital euro wallet to make online payments. Pre-funding would only be required for offline payments.

As another point there will be holding limits to prevent instability and bank runs.. In order not to destabilize the banking system, it is planned to introduce a storage limit – presumably from 3000 to 4000 euro per person. This would cap the amount individuals can keep in digital euro form, and only natural persons – not merchants – would be allowed to hold digital euros. For offline, obviously, one need to have the money in the wallet beforehand.

Guarantees on privacy and data protection

According to the ECB privacy is not an afterthought. Privacy has been a top priority of the digital euro project since its inception. The ECB says the digital euro project is built around privacy and data protection from the start, reflecting citizens’ expectations. To protect consumers data, the digital euro will be built on Europe-owned infrastructure, to offer the highest degree of privacy possible for an electronic means of payment.

The Euro system central banks will not be able to tell who is behind individual payments. For the online solution, they will not have access to people’s data. All the ECB will see is encrypted codes that represent the payer and the payee, but they will not be able to identify the individuals behind these codes. And those who use the digital euro offline will pay almost as anonymously as they do with cash. One of the main chips should be the ability to pay without the Internet, which will increase the level of privacy.

But what may the digital euro further bring?

The digital euro, would offer a single instrument usable online, at the point of sale and also offline. It will enable cashless payments to be made simply, securely and across borders throughout the euro area. Potential benefits include faster payments, lower costs, improved resilience and stronger European autonomy

For consumers

The digital euro is intended to function alongside cash and accessible to anyone in the euro zone. The outlook for consumers is largely positive: the digital currency is said to be safe, reliable, and free to use. For everyday users, the digital euro promises several practical advantages. The main advantages would be simplicity and choice, with a single payment solution allowing people to pay anywhere in Europe for all use cases while maintaining the freedom to pay as they wish. A high level of privacy is expected for small transactions and an offline function will be introduced, allowing payments without an internet connection. Because it would also be free to use, the digital euro could contribute to financial inclusion.

For small and medium-sized companies

Businesses, and especially small and medium-sized enterprises, can also benefit from the digital euro. The digital euro will be a cost-effective alternative to existing digital means of payment for retailers.

For merchants, presently burdened by expensive international card schemes, the digital euro could significantly reduce the cost of accepting digital payments, and reduce Europe’s reliance on non-European payment providers. Especially for small merchants accepting payments done through international card schemes is very expensive. The existence of a public digital payment option would strengthen competition by giving small merchants greater negotiating power with private payment providers. The digital euro also presents an opportunity to overcome the strong fragmentation of the European payments market. At present, there is no European payment solution that is accepted in all euro area countries – except for cash.

Entering the technical preparation phase

The ECB has now finished the initial preparatory phase. In October 2025, the ECB Governing Council announced the next phase of the digital euro project, the technical preparation phase. The ECB and industry partners are thereby working on the technical foundation, gradually iron out the technical details and prepare for a pilot in the second half of 2027. The coming years will focus on stress testing ideas and real-world use cases with market participants.

In October the ECB also announced seven companies with whom it signed framework agreements for various digital euro components and services. Specifically, for alias lookup, risk and fraud management, app and software development kit, offline solution, and secure exchange of payment information.

In the meantime the ECB launched a Digital Euro Innovation Platform with around 70 market participants to test payment functionalities and explore use cases. focused on testing programmability and related functionality. In parallel, the ECB also selected preferred service providers for specific components such as offline solution, fraud and risk management, app and SDK, alias lookup, and secure exchange of payment information.

The ECB has issued a call for experts i.e. technical service providers (TSPs), active in the retail payment industry and established in the EU, to participate in two “expert-level workshops” exploring their potential role in “fostering market readiness for a potential issuance of the digital euro.” TSPs are broadly defined as providers of services that, although not being payment service providers (PSPs), are necessary to support the provision of payment services. PSPs will carry out both distribution and acquiring activities in relation to pilot digital euro services, “ensuring that consumers and merchants have access to these services,” but these PSPs may choose to rely on TSPs to support their development efforts. TSPs can deliver synergies for PSPs, reducing costs while helping to deliver robust, efficient and innovative solutions for a digital euro, gathering views on how the Euro system could help these services’ market readiness for the digital euro.

The rest of the digital euro process: The way forward

The digital euro project remains conditional on EU legislation. With the European Parliament expected to vote on its position in May, this could pave the way for pilot projects in 2027 and the issuance of the digital euro by mid-2029.

European Parliament has yet to take its position

The European Parliament is the only institution that has yet to take a position on the digital euro project and is still determining its final stance whether to move forward with the project. The case is now going through the ECON Committee towards a first plenary vote on 5 May 2026, which will determine the technical details of the project.

Finalisation of the Legal framework

EU lawmakers must approve the final legal framework. Should the digital euro be approved in the European Parliament plenary, the European Commission, the European Parliament and the European Council would then negotiate a political agreement. If all goes well negotiations between the EU institutions could follow, with legislation potentially in place by the end of the year. Once the legislation is adopted, the digital euro standards can be finalised and made available, providing a basis for the implementation of the digital euro. This legal basis is a prerequisite for the Eurosystem to be able to start issuing the digital euro.

Carrying out pilot operation on digital euro

If lawmakers and national governments reach agreement by the end of 2026, the ECB could begin testing the digital euro on a limited basis. The ECB said it was now looking at carrying out a pilot operation of a retail digital euro, meaning some transactions in digital euros may be carried out. The start of the first pilot projects and test transactions involving banks, other payment service providers, merchants and Eurosystem staff is planned by mid-2027.

First issuance of the euro in 2029

In the current project phase, the ECB is preparing to be able to a full-scale introduction of the digital euro into circulation mid-2029, depending on regulation. The whole Euro system should then be ready for a potential first issuance of the digital euro.

But also positive signals

Though the digital euro project met resistance from bank lobbies and progress in parliament stalled, this is changing. There is a growing number of positive signals that may bring a digital euro a step closer.

The European Council approved the introduction of the digital euro

On the legislation side we are now progressing well In December last year, the European Council, which consisted of the Minsters from all EU countries, in this case the Ministers of Finance, has approved the introduction of the digital euro, reaching an agreement that is pretty close to the Commission’s original position.

This marks a new step toward such a central bank currency, operated by the European Central Bank as a digital equivalent of cash, thereby putting pressure on the European Parliament to come with appositive decision in May this year. In its proposal, the Council also determined the legal status of such a currency. The Council’s position states that a digital euro should be a compulsory means of payment, designed as a supplement to cash and available also offline, while the Cash Regulation tightens the obligation to accept cash in stores and obliges member states to ensure actual access to banknotes and coins. The aim is to prepare the euro for the future, strengthen the EU’s strategic autonomy and ensure that both cash and an eventual digital euro can be used effectively throughout the euro area. The EU finance ministers agreed on a framework for customer holding limits, a key feature for controlling usage and safeguarding bank deposits.

The European Parliament has voted to support both online and offline formats

And there is the European Parliament that gave its first major backing to the digital euro, endorsing the European Council’s negotiating stance for a central bank digital currency. MEPs approved two amendments to parliament’s resolution on the ECB’s 2025 annual report, calling for a digital euro that ensures equal access to payment services and provides a new form of public money usable both online and offline, thereby expressing support for the introduction of the digital euro. This marks a shift from earlier parliamentary proposals focused solely on offline payments and signals closer alignment with the ECB on safeguarding the bloc’s monetary sovereignty.

Notwithstanding the European Parliament still has to give a final decision, that is expected in May this year, the endorsement matters because the European Central Bank needs Parliament’s legislative approval before it can issue a digital euro, meaning its goal of a 2029 launch depends on lawmakers signing off. Lawmakers also underlined that introducing a digital euro is essential to strengthening EU monetary sovereignty, reducing fragmentation in retail payments, and supporting the integrity and resilience of the single market. The European Parliament also urged the ECB to step up monitoring of crypto‑assets, warning that the shift to digital payments, if left to private and non‑EU providers, risks creating new forms of exclusion for users and merchants.

70 European economists expressed their support for the digital euro

Also economists have expressed their support for the digital euro. About 70 European economists, among them Thomas Piketty, have signed a petition urging MEPs to “let the public interest prevail” asking EU parliamentarians to support a strong public digital euro In an open letter published in January, they described the project as an “essential safeguard of European sovereignty, stability and resilience”. Supporters say a well-designed digital euro could strengthen Europe’s financial autonomy. They argued that a digital single currency would allow Europeans to make online payments without relying on US-based card companies or payment systems. For them, a digital euro is a necessary safeguard of European monetary sovereignty, stability and resilience. They warned that otherwise the eurozone risks losing control of the most fundamental component of the economy – the euro – to foreign private payment giant and dollar-linked stablecoins, that could gain even greater influence over Europe’s digital payments, deepening dependencies in times of stress.

Commercial banks wish to reduce dependence on US tech and payments services companies

And there are renewed calls within the commercial banking sector in Europea to reduce their dependence on US tech and payment services companies. European banks currently rely primarily on American technology, such as cloud services and artificial intelligence (AI). In the Netherlands Rabobank, ING, and ABN Amro want to reduce their dependence on American tech companies as much as possible. The three major Dutch banks are in consultation with other European banks to this end. They are responding to concerns from the European Commission and regulators such as the European Central Bank (ECB) about the dependence on American big tech. They are looking into whether they can set up cloud and data structures here to preserve European sovereignty.

There is also the example of how sixteen major European banks are currently collaborating in Wero, the European version of the Dutch payment service iDeal. This is intended to become an alternative to the American payment services Visa, Mastercard, PayPal, Apple, and Google. In addition to Rabobank, ING, and ABN Amro, this European Payments Initiative also includes major European banks such as Deutsche Bank, the Belgian KBC, and the French BNP Paribas, Crédit Agricole, and Société Générale. These private sector solutions such as Wero could benefit from the pan-European reach of the digital euro, for example by integrating the digital euro into the Wero wallet. On the flip side, Wero could be an important means by which people use the digital euro – a win-win situation. This asks for public-private partnership between these commercial banks and the ECB, enhancing the resilience of EU payment systems and strengthen EU’s autonomy.

Final thoughts: Towards monetary sovereignty

The digital euro is more than a new payment method. It reflects a long-term European vision for stability, independence, and innovation in the digital economy. A strategic investment in Europe’s financial future, reducing reliance on non-European payment networks, preserving Europe’s strategic autonomy and monetary sovereignty. Building a robust and efficient monetary system and payment ecosystem that meets the needs of the digital economy, may strengthen its position in the global financial landscape, and support Europe’s growth and competitiveness in a fast-changing world. Over time, a stronger international role for the euro, via this digital euro, could make Europe less vulnerable to US monetary policy shifts and dollar movements as well as to growing transatlantic geopolitical risks. Now it is waiting to the next steps.

Carlo de Meijer

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The digital euro: Towards more European digital autonomy

But first: why is the digital euro necessary?

Towards greater EU financial autonomy and resilience

Addressing concerns from banks and consumers

But what may the digital euro further bring?

Entering the technical preparation phase

The rest of the digital euro process: The way forward

But also positive signals

Final thoughts: Towards monetary sovereignty

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