The bumpy road towards a digital euro

Amid the rapid digitalisation of payments, since 2020 the European Central Bank (ECB) has been advocating the introduction of a digital euro. This drive was exogeneous. It was triggered by developments on the other side of the Atlantic, when Facebook announced plans to launch a global digital currency, first called Libra and later Diem. Although that project was eventually abandoned, it acted as a catalyst. Once introduced, the idea of a digital euro never left the European policy agenda.

In 2023, the European Commission proposed an enabling legislative framework, and the ECB continued to advance the project through its preparatory phases. However, as the initiative gained momentum, several lines of political conflict became increasingly visible. We have identified three dominant ones.

The first and most fundamental of these concerns the rationale for a digital euro. Why is it needed? The narrative has shifted considerably over time. Initial justifications emphasised a need to preserve public money as a trusted anchor in an increasingly privatised digital payments ecosystem. This was followed by a focus on the financial inclusion benefits of an offline digital currency. More recently, the dominant argument has become one of strategic autonomy, namely reducing Europe’s dependence on US-based payment/stable coin providers, whose infrastructure could potentially be weaponised against European interests.

A second conflict revolves around the design of the digital euro and the roles of the public and private sectors in its distribution. This is a delicate issue, as it requires constructive dialogue between policymakers and the banking and payments industry, which unsurprisingly has strong vested interests in the matter. Striking the right balance between public oversight as a public good and private sector involvement driven by incentives remains a central challenge to the success of the digital euro.

A third line of tension concerns institutional responsibilities within the European Union. This is especially evident in the debate over holding limits. Digital euro accounts will be capped, but the legislative process is currently grappling with who should ultimately decide on the level of these limits and under which conditions they may be adjusted.

As legislative discussions intensify in 2026, it is worth stepping back to consider the questions that are likely to shape the debate in the coming year. Four stand out.

• First, while the macroeconomic and geostrategic arguments for a digital euro are compelling, its concrete use case for European citizens remains unclear. What problem does it solve at the micro level?
• Second, in an environment marked by disinformation, conspiracy theories and declining trust in public institutions, how can confidence in the digital euro be built and sustained?
• Third, the regulatory proposal requires payment service providers to offer digital euro wallets free of charge to customers who request them. What incentives will encourage these providers to actively promote adoption?
• Fourth, with instant payments becoming mainstream following the 2025 Instant Payments Regulation and the rise of private initiatives such as Bizum, Wero and new stablecoin initiatives, is there still space for a digital euro in an already crowded payments landscape?

The answers to these questions will arguably determine whether the digital euro becomes a cornerstone of Europe’s monetary future or it remains a well-intentioned but contested experiment.