In the Eurozone, more citizens now use cards, smartphones, and payment applications, while paper money and coins play a smaller role in daily transactions.
For the European Central Bank (ECB), this digital transformation raises a key question: how can the role of public money be preserved in a world that is increasingly turning to cashless payments? The proposed answer is the digital euro, a new central bank currency designed to function like cash, but in digital form, Euronews reports.
Complementing Physical Cash
“The main reason for introducing the digital euro is to preserve the advantages of cash in the digital age,” said Piero Cipollone, a member of the ECB’s Executive Board, in July.
“To achieve this, we need to complement physical cash with its digital form.”
While cash is simple, universally accepted, and independent of bank accounts and fees, digital payments generally flow through private systems, mostly U.S. card companies or tech giants, which come with risks such as fees, data tracking, and the exclusion of the unbanked.
A Risk to Monetary Sovereignty
The share of cash payments in the Eurozone fell from 68% in 2019 to 40% in 2024 by number of transactions, and from 40% to just 24% by value. If the ECB does not introduce a digital euro, there is an increasing risk that Europe’s monetary sovereignty will be undermined by private, often non-European, solutions.
Cipollone warns that the inability to use cash for online payments or digital transactions reduces competition, resilience, and consumers’ freedom to choose how they pay.
Consumers and Small Businesses Still Value Cash
Although the trend is toward digitalization, cash remains preferred by many small and medium-sized enterprises. In Austria, more than 50% of companies still favor cash payments; in Italy, around 40%; and across the Eurozone as a whole, nearly one-third.
Economists warn that without a standardized public platform like the digital euro – there is a risk that the European market will be completely dominated by private and foreign payment systems.
How Will the Digital Euro Work?
Users will access it through a digital wallet, available via banks or public institutions. Payments will be instant, free of charge, and possible both online and offline. Funds can be loaded from a bank account or in cash, with limits imposed to prevent large-scale capital outflows from banks.
The ECB emphasizes that it will not track citizens’ purchases or private data, thereby preserving user privacy. One digital euro will always equal one euro in cash.
When Can We Expect Its Introduction?
The ECB is currently in a preparatory phase, lasting until October 2025. Only after the legislative process is completed can a decision be made on whether to move forward. Even with a “green light,” development will take another two to three years, meaning the digital euro is realistically expected between 2027 and 2029.
Impact on Global Finance
Although there is frequent speculation about the impact of digital currencies on the dominance of the U.S. dollar, the ECB stresses that the digital euro is not a geopolitical instrument but a tool for retail payments within Europe.
The dollar continues to dominate global trade and finance thanks to trust and established international networks, but the digital euro could strengthen the single currency within Europe itself.
