Digital Euro Framed as “Cash for the Online Age” by ECB Official
The European Central Bank is pushing ahead with plans for a digital euro not as a tech experiment, but as a response to what it sees as a growing strategic weakness in Europe’s payment system.
- The ECB frames the digital euro as a digital form of cash, meant to preserve the ability to pay with central bank money as cash becomes less usable, especially online.
- The project is driven by simplicity and resilience, offering one payment tool that works across Europe while reducing reliance on non-European payment providers.
- Safeguards such as holding limits, no interest, and strong privacy protections are designed to prevent bank instability and protect citizens’ data.
In an interview, ECB Executive Board member Piero Cipollone framed the project as a way to protect citizens’ freedom to pay with central bank money in a world where cash is increasingly unusable, especially online.
He stressed that the digital euro does not yet exist and will not be launched before a full legal framework is approved. Still, the direction of travel is clear: the ECB wants to introduce a digital version of cash that works in places where physical banknotes no longer can.
A digital version of cash for everyday payments
Cipollone described the digital euro as an extension of cash into the digital economy. While physical cash remains important, it cannot be used online and is increasingly impractical in a growing number of payment situations. The digital euro is designed to close that gap, giving citizens access to central bank money in both online and offline environments.
A key selling point is simplicity. Instead of juggling multiple cards, apps, and wallets, people would be able to rely on a single payment instrument that works across the euro area, in shops, online, and even during power or internet outages.
Why private wallets are not enough
Although many Europeans already pay digitally through private mobile wallets, the ECB argues that the market is fragmented and incomplete. Some solutions work only online, others only in physical stores, and very few can function offline.
According to Cipollone, the digital euro would unify these use cases and add features that do not currently exist, particularly offline payments. He also framed this as a civic issue, not just a consumer one, saying citizens should care about how resilient and reliable their payment systems are.
Cutting costs for small businesses
For merchants, especially smaller ones, the ECB sees a clear economic benefit. Cipollone pointed out that small businesses often pay significantly higher fees to accept card payments through international schemes, sometimes several times more than large retailers.
Because the ECB would not charge scheme fees, the digital euro could substantially lower transaction costs. It would also give merchants more leverage when negotiating with private payment providers by introducing real competition into the market.
Strategic autonomy and European resilience
One of the strongest arguments Cipollone made was about Europe’s dependence on non-European payment companies. Around 70% of card payments in Europe are processed by firms based outside the EU, a situation the ECB views as a strategic vulnerability.
From this perspective, the digital euro is not just a payment tool but part of a broader push for European autonomy. The ECB believes relying on foreign infrastructure for something as fundamental as payments leaves Europe exposed in times of stress or geopolitical tension.
Timeline and legislative hurdles
Progress now depends largely on politics. The European Commission published its proposal in 2023, and the EU Council has already reached a position close to that original text. The European Parliament is expected to vote on its stance by May, after which negotiations could begin.
If the legislative process stays on track, the ECB plans to run a pilot phase in 2027, with a potential public launch around 2029. Cipollone noted that the technical rollout will move in parallel with the pace of lawmaking.
Addressing bank stability concerns
Banks have warned that a digital euro could drain deposits from the banking system. Cipollone said these risks have been considered from the start and addressed through multiple safeguards.
The digital euro will not pay interest, holdings will be capped, and only individuals will be allowed to hold it. Most payments will use a “waterfall” mechanism, drawing funds directly from bank accounts at the moment of payment, rather than encouraging people to store money in digital wallets. ECB simulations suggest these measures prevent threats to financial stability.
Privacy is central to the project, according to Cipollone. For online payments, the ECB would see only encrypted data, not personal identities, with transaction details remaining at the level of commercial banks. For offline payments, privacy would be even stronger, resembling cash transactions where only the payer and payee know the details.
Exchange rates and monetary policy
On monetary policy, Cipollone downplayed the role of the euro’s exchange rate. While currency movements are factored into inflation forecasts, the ECB does not target the exchange rate directly. Interest rate decisions, he said, will continue to be guided by inflation dynamics rather than the euro’s value against the dollar.
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