The ECB Promotes the Idea of a Digital Euro as a Guarantee of Europe’s Independence

When sunburnt Eurocrats return from their summer holidays to Brussels and once again face the onslaught of lobbyists, they will encounter an unexpected delegation—the European Central Bank.

At the top of the ECB’s agenda is the digital euro, designed as an electronic counterpart to cash. The initiative has already irritated banks and drawn criticism from right-wing politicians.

The debate is entering a new phase: EU member states are trying to agree by the end of the year on how exactly the digital currency should function. Parliamentary approval still lies ahead, and the autumn session promises to bring especially heated exchanges.

The concept of a digital euro is about more than just a new means of payment—it carries a geopolitical dimension. The ECB fears that in a world where cash transactions are rapidly disappearing, its monetary role could be at risk. Abandoning the initiative, in the regulator’s view, would leave the European Union excessively dependent on American giants Mastercard and Visa, which dominate cross-border transactions. Even more troubling is the prospect of companies like Meta, Apple or X entering the payments space, turning Europe into a hostage to outside interests.

Donald Trump’s rise to power has only deepened concerns. The White House wields corporate pressure without hesitation for political ends, and Trump himself signed the Genius Act, aimed at accelerating the development of crypto-assets in the "stablecoin" category.

Unlike volatile cryptocurrencies such as Bitcoin, stablecoins are pegged to fiat currencies—most often the dollar. This makes them far more predictable and therefore genuinely threatening to traditional currencies, including the euro, particularly in cross-border transactions.

In this climate, the ECB has stepped up its lobbying campaign. In September, its representatives are taking part in seminars for members of the European Parliament, followed later by a visit to Brussels from the project’s chief advocate, Piero Cipollone. The end of the month will bring another opportunity to push the digital euro, as EU finance ministers and central bankers gather in Copenhagen.

Yet the ECB’s focus is less on ministers than on Fernando Navarrete—a former central banker, now a center-right MEP tasked with steering the project’s legal framework through parliament. The problem is that Navarrete approaches the digital euro with marked skepticism.

The idea of central bank digital currencies (CBDCs) has been discussed for years but rarely moved beyond theory. The ECB began serious work in 2019, after Meta attempted—unsuccessfully—to launch its own global digital currency for three billion users in the form of a stablecoin. In essence, the digital euro is a virtual extension of Europe’s single currency.

The digital euro will be backed by the ECB and maintain the same value as cash or bank deposits, complementing them. It could be used to pay for goods and services or to transfer money to friends. The key difference is that it would likely be stored in the form of a wallet app on a smartphone. At the same time, the ECB would keep its own record of the virtual funds, eliminating the risk of loss.

What sets the digital euro apart is that it would be an official digital means of payment, issued directly by the central bank and, in theory, not requiring the involvement of commercial banks—a truly revolutionary step.

Money in a bank account does not sit idle waiting for the client. Most of it is lent out in the form of mortgages and other loans, with only a small fraction held in reserve. The funds in your account are, in effect, merely a bank’s promise to pay on demand. The entire system works only because depositors do not withdraw all their money at once. Without safeguards, a bank would collapse if that happened.

The digital euro would operate differently. It would effectively be stored in a digital "vault" and would not be lent out for mortgages or business loans. One digital euro in an electronic wallet would be just as legal and real as a coin in your pocket. And since the ECB would keep a record of every unit, it would be even more secure than cash, which is easier to steal, lose or destroy.

Payments in digital euro are meant to be simpler than current transactions. Instead of your bank navigating a complex chain of settlements with the seller’s bank through intermediaries such as Visa or Mastercard, money could be transferred directly—from the buyer’s digital wallet to the seller’s. In essence, it would be the equivalent of handing over cash. On paper, banks and payment companies would not be needed at all, though in practice they are expected to play a role in distributing the digital euro. In other words, the new currency has the potential to challenge the private sector’s monopoly on cashless payments.

Although conceived by the ECB, the stalled digital euro project ultimately depends on decisions by EU governments and members of the European Parliament, who must establish the legal framework. It is here that politics has intruded into what was once a technical debate. MEPs, for instance, have echoed fears that governments might use the digital euro to monitor citizens’ personal payments—concerns the ECB categorically rejects.

The financial sector has greeted the project with equal skepticism. Bankers and investors call it "a solution in search of a problem" and warn that they will be the ones footing the bill for the new currency’s infrastructure. Critics argue that launching the digital euro would lock the EU’s entire payments system into a rigid trajectory, stifling innovation.

Lobbying has already borne fruit. MEP Fernando Navarrete described the digital euro as "a last resort" and even "a nuclear threat," one that is pushing the industry to develop its own cross-border payments system before the legislation is even ready.

Debates in the EU Council and Limits for Citizens

The ECB must overcome not only resistance in the European Parliament. In the EU Council, which represents member-state governments, officials aim to agree on a common position on the digital euro bill by year’s end. This worries the regulator, as the Council is pressing to set limits on how many digital euros each citizen can hold at one time—measures meant to reassure banks fearful of massive deposit outflows.

Another contentious issue is whether banks should be entitled to charge fees for distributing the digital euro and for ensuring their payment infrastructure can accept virtual "banknotes" at the counter.

Countries particularly attentive to data privacy, including Germany and the Netherlands, are demanding maximum safeguards against payment surveillance. Belgium has said it will not support the project unless the digital euro can function offline.

Central banks are accustomed to shaping policy through lofty speeches and backroom conversations. But in the case of the digital euro, that has proved insufficient. With Trump’s return to the White House, the ECB has had to step down from its "ivory tower" and enter the political fray directly.

All this points to bitter debates in the months ahead. Yet the European Parliament does not intend to settle on a final position until May of next year. Which means there is little chance of paying with the digital euro before 2028.