The digital euro – Europe's opportunity to regain control of payments

For more than twenty years, I have been guiding banks, companies and public institutions through the ups and downs of payment transactions. I have seen how SEPA standardised the transfer landscape, how instant payments set new speed standards and how PSD2 revitalised competition in the financial sector. But what lies ahead is different. The digital euro is not just another update. It is the beginning of a new era – technologically, politically and economically.

The European Central Bank (ECB) is pushing ahead with the project with determination. And for good reason: it is not just about more efficient payment processes. It is about Europe's digital sovereignty. The vision is for payment flows to function independently of non-European tech giants and geopolitical uncertainties in the future. If designed intelligently and implemented consistently, the digital euro could become not just a symbol, but a real instrument for Europe's independence and innovative strength.

In this blog post, I will shed light on the current status of the project, discuss technical and regulatory developments, and show why now is the right time to prepare strategically. And yes – a little pragmatism is also called for.

Where do we currently stand?

In November 2023, the ECB officially launched the so-called ‘preparatory phase’ for the digital euro. It will run until October 2025 and includes technical tests, legal clarifications and the establishment of a common set of rules. However, a final decision on its introduction will only be made after the European legislative process has been completed – probably at the end of 2025. Realistically, a widespread introduction before 2028 is hardly conceivable.

The ECB is currently working with more than 70 partners, including banks, fintechs, retailers, payment service providers and research institutes. The aim is to create a system that is widely accepted and technologically future-proof. It is a mammoth project, but not an unrealistic one.

Technology: Must work – even offline

One of the most exciting aspects is the planned availability of the digital euro both online and offline. While we have long been accustomed to online payments, offline functionality poses a particular challenge. And this is where it gets interesting: the digital euro should also work when there is no internet available – whether due to a power outage, a dead mobile phone signal or in remote regions.

The plan is to use special technologies, such as battery-powered cards with displays or NFC-enabled hardware wallets. These must not only be reliable, but also meet high security and data protection requirements. Completely unlimited offline payments are not expected to be possible – and for good reason: traceability and security must be guaranteed. Limits on the number or amount of offline transactions are therefore likely.

Data protection: trust as a prerequisite

Anyone who has anything to do with money in Europe knows that nothing works here without data protection. And that's a good thing. The ECB emphasises that the protection of personal data is a top priority for the digital euro – especially for offline payments, which should allow a level of anonymity similar to that of cash.

For online payments, on the other hand, pseudonymisation is used: transaction data is processed but not directly linked to identities. At the same time, legal requirements – such as those relating to money laundering prevention – must be complied with. Striking a balance between privacy and regulatory control is one of the most sensitive issues of the project. It will be exciting to see how this balancing act is achieved.

Holding limits: stability before freedom

One frequently discussed topic is the so-called holding limits. The idea behind this is that the digital euro should not compete with traditional bank deposits. If too many people were to park large sums in digital euro wallets, this could jeopardise the liquidity of commercial banks – with all the known side effects.

The ECB is therefore proposing to limit the amount of digital central bank money that can be held per person to between €1,000 and €3,000. Any amounts above this limit would be automatically transferred back to a traditional bank account. Nothing has been finalised yet, but one thing is clear: these caps will be introduced. They are a key instrument for maintaining financial stability.

Integration: The digital euro as part of the whole

The digital euro is not intended to be an isolated system, but rather to integrate seamlessly into the existing payment infrastructure. This applies not only to SEPA and instant payments, but also to integration into banking apps, digital identity solutions and even smart contracts.

The ECB will provide the central infrastructure, while banks, fintechs and technical service providers will deliver the end-user solutions. This interaction is intended to promote innovation without completely abandoning existing systems. The digital euro will therefore not make everything new – but it will make many things better.

Regulation: creating clarity

In addition to the technical design, the European Commission is working in parallel on a comprehensive legislative package. This is intended to establish the digital euro as legal tender – with a few exceptions, e.g. for micro-enterprises or in cases of individual agreements.

It is also planned that the digital euro will remain interest-free in order to avoid competition with bank deposits. There are no plans to introduce usage fees either. The message is clear: the digital euro should be simple, accessible and inclusive – a tool for everyone, not just tech enthusiasts.

Industry focus: who stands to benefit?

The impact of the digital euro is wide-ranging and varies greatly depending on the industry:

• Credit institutions could suffer from deposit outflows. At the same time, new business areas are opening up: wallets, identity services, programmable payments – all markets with a future.
• Insurers could automate processes, for example when sensors automatically trigger payments in the event of damage.
• SMEs and industry will benefit from lower transaction costs, easier integration into ERP systems and fewer exchange rate risks for international payments.
• The healthcare sector can make billing between health insurance companies, clinics and patients more efficient – especially for cross-border care.
• The public sector could pay social benefits, subsidies or fees directly and transparently via digital wallets – faster, more securely and more traceably.

Pilot projects: it's already happening

In Estonia, tests are already underway to see how social benefits can be paid digitally. In Germany, energy suppliers are experimenting with peer-to-peer electricity trading between households – including automated billing. And in industry, tests are underway in which machines process payments independently. This is no longer a dream of the future – it is already reality. And it is already changing processes and expectations.

Sustainability: Nice to have – or a real lever?

One aspect that has tended to fly under the radar so far is the ecological impact of the digital euro. Digital payments are almost always more climate-friendly than cash: less paper, less transport, less energy. If the digital euro is powered intelligently by green electricity, it could make a real contribution to sustainability – whether as a side effect or a conscious goal remains to be seen.

Europe in global competition

Central banks around the world are working on digital currencies. China is already well ahead with its digital yuan, and the US and the UK are also testing their own models. Europe must not fall behind here – not out of vanity, but out of strategic necessity.

This is because many payment systems today are based on non-European infrastructures. The digital euro is also a response to these dependencies – and a building block for Europe's ability to act in a connected world.

Participation: no success without trust

The ECB is deliberately focusing on participation in the implementation process. Banks, companies, associations and citizens are involved in workshops and consultations. The process is steered by a high-level task force, in close coordination with the Commission and the national central banks.

No matter how good the technology is, without transparency and trust it will be difficult. That is why communication, participation and openness are central elements of the project.

What remains to be done?

As promising as the developments to date are, some key questions remain:

• What might attractive offline use look like in concrete terms?
• How can the balancing act between data protection and supervisory obligations be resolved technically?
• What is a sustainable upper limit in the long term?
• And above all: how can the general public be won over to a new means of payment?

The coming years will show how viable the concepts really are.

My suggestion: a five-step plan for decision-makers

If you are currently considering whether and how you should prepare for the digital euro, here is my compact, practical roadmap:

• 1. Assess your technological position: How well are your systems set up? Where are the gaps?
• 2. Raise awareness: Get all relevant stakeholders on board at an early stage – IT, compliance, treasury, product.
• 3. Launch pilot projects: Start small – for example, with wallets or smart contracts. The main thing is to get started.
• 4. Analyse regulations: What does the digital euro mean for your processes relating to data protection, AML or risk management?
• 5. Position yourself strategically: Do you want to actively shape the change – or watch others reap the benefits?

Conclusion

The digital euro is much more than a technical experiment. It is a strategic project with enormous potential – for Europe, for the economy and for each and every one of us. Those who observe closely today will be able to actively shape the future tomorrow. And those who plan wisely will gain a real advantage.