The digital euro, Pontes and Appia: a problem in search of solutions?

Until recently, many analyses dismissed the digital euro as “a solution in search of a problem,” highlighting the absence of obvious market failures or clear use cases. This framing, however, risks overlooking the EU’s strategic autonomy concerns in a key domain of its financial system. The Trump administration’s aggressive use of tariffs and other geoeconomic instruments has exposed an uncomfortable reality for European policymakers: reliance on foreign-owned payment networks could leave the EU vulnerable to geoeconomic pressure. Against this backdrop, the European Central Bank (ECB) is responding with two parallel Central Bank Digital Currency (CBDC) initiatives: the retail digital euro and the dual-track wholesale CBDC projects (Pontes and Appia).

The puzzle is straightforward: why invest large public funds when the EU already has efficient payment systems according to conventional measures? The answer lies not only in performance, but in who controls the rails.

Two-thirds of eurozone card transactions are processed by Visa and Mastercard. Thirteen EU member states have no domestic card alternative whatsoever. This is not just market concentration. It is perceived as a risk of vulnerability. The digital euro responds to this entrenched dependency by routing settlements along Eurosystem-governed rails. Core components can only be built by EU-established entities. Mandatory acceptance rules could help to overcome the high switching costs that often block alternative platforms from scaling up.

None of this is cheap. The ECB’s own build costs are around €1.3 billion before any digital euro is issued, with annual operating costs of € 320 million thereafter. Financial institutions face separate implementation costs. The ECB estimates up to €5.8 billion, while an industry-commissioned analysis puts the figure at 2 to 4 times that. In parallel, despite a slow rollout, pan-EU private initiatives, such as Wero, the European Payment Initiative, are being consolidated.

The wholesale side poses a different, arguably more urgent challenge. Dollar-backed stablecoins already account for 99% of the global stablecoin market, while the financial industry is increasingly betting on tokenisation. The US GENIUS Act has reduced regulatory uncertainty for dollar-based stablecoin issuers in a moment when the network effects of whichever layer of monetary infrastructure is consolidated first are likely to prove self-reinforcing and hard to reverse. Once this equilibrium forms, switching costs could become prohibitive – exactly the pattern already visible in traditional wholesale markets.

The ECB’s Pontes and Appia projects are designed to prevent such a replay. Their purpose is to provide public infrastructure – governed by the Eurosystem and settled in central bank money – with which the financial industry can explore tokenisation on European terms.

Pontes connects market DLT platforms to the Eurosystem’s existing infrastructure via an interoperability layer anchored in T2. Appia extends this logic by exploring the development of a full DLT system for programmable payments, cross-border integration and collateral management. The design accepts real costs. Industry associations argue that a Eurosystem centralised architecture adds unnecessary complexity and undercuts the technology’s potential. However, as ECB board member Cipollone has put it, lower short-run costs may not be efficient if they expose Europe to much larger costs later.

The ambition is clear, and the window of opportunity remains open, yet opening a window is not the same as walking through it.

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This blog post summarises the RSC 2026/06 Working Paper: The Weaponisation of Interdependence and ECB Infrastructure: The Digital Euro, Pontes and Appia