The EU’s plan for a new digital currency

What makes cash different? It’s simple, private and widely accepted. There are no hidden fees when paying, and your payment history stays with you and no one else. In contrast to this, most digital forms of payment today involve private counterparties. Debit and credit cards are easy to use but every time you pay, the transaction goes through a network that tracks your data and charge the merchant fees. Much of the spending that is happening in Europe today is done with non-European payment providers. Even though cash still is a widespread form of payment in many European countries, its popularity has started to decline. One concern is that the gap left by lower cash use will be filled by said non-European payment providers. With a digital Euro, full privacy for offline payments and a high degree of privacy for online transactions would be guaranteed. A digital Euro would be public infrastructure, free for individuals to use, widely accepted and neutral. It would not aim to replace cash or existing forms of payment, but rather be a safe and reliable supplement that could benefit both merchants and individuals. 

Users would be able to access the currency through a digital wallet, likely provided by their bank or a public authority according to the ECB’s digital Euro project. The payments would be instant and as simple to use as tapping a card, even without internet connection. The digital euro would protect user privacy, and the ECB would not be able to track purchases or personal data. Users would also only be able to hold a certain amount of digital euro in their account in order to ensure the stability of the existing financial system.

The intention behind introducing a digital Euro would not be to challenge the existing global financial order or the dominance of U.S. Dollar. It is simply meant to be a retail payment tool for use within Europe, the same role as physical cash holds today. A digital Euro would give Europeans access to public money in a digital world, protect privacy and future proof the single currency. Could the introduction of a digital euro increase the demand and, in turn, strengthen the exchange rate?

Over the last few years so called stablecoins have increased a lot in popularity. These are cryptocurrencies which have their value pegged to an underlying currency, commodity or financial instrument. Two popular ones are USDT and USDC which are both pegged to the U.S. Dollar. Cryptocurrencies are known to be highly volatile and therefore are not optimal for everyday transactions. The GENIUS act signed by U.S. President Donald Trump in July 2025, requires all stablecoins to be backed by a 1:1 reserve of stable assets. This law raised alarm bells in Europe, with officials worrying that it would lead to higher dollar dominance and further increase European reliance on foreign payment providers.

Don’t expect to pay for your lunch with digital euros right away. The project is still in its preparation phase which lasts until October 2025. The ECB then expects the development phase to last an additional 2-3 years, giving a realistic launch window between 2027 and 2029 provided that everything is approved. Introducing a new digital currency is not an easy task and it will take time to make sure everything is done properly. Nonetheless it will be interesting to see the development of how payments will be done within the Eurozone in the coming years.