Digital euro: year-end review

December 9th 2025

Europe’s digital euro is stuck in limbo. Two years of debate, over a billion in planning — and yet, the question remains: how badly do we need it?

Two years ago I first looked at the question of whether the upcoming digital euro would be a blessing or a curse for European citizens. Much has happened since, so it is time for an update.

Summary: compared to the summer of 2023, we now have more clarity on some of the design choices for the digital euro, we have new regulatory frameworks in the EU and the USA, and we have seen stormy growth in stablecoins. The latter has emerged as a competitive threat to the digital euro. And geopolitical developments have clearly laid bare the extent of dependencies that Europe has on other large nation states. Back in 2023, privacy was the biggest fear. Today, the bigger threat may be irrelevance — as EPI and euro‑stablecoins race ahead.

The digital euro is being designed by the ECB and will be supervised by the network of central banks in the euro area (the Eurosystem). It is a digital counterpart to physical cash, and most crucially it is public money backed by the state. All other types of digital monies, present and future, come from private sector issuers.

Back in 2023, privacy was the biggest fear. Today, the bigger threat may be irrelevance.

Why would you want to have a digital euro?

Granted, in some European countries it seems hard to make a case for it. If you have excellent and fast payment solutions (like IDEAL, the template for the ‘wero’) and no financially excluded people then on the surface the benefits can be hard to discern. However there is more to it than that. Whatever shape the digital euro comes in (online, offline, in a card or an app) — it is public money and not privately managed like the fiat euros in an account at a commercial bank. And since it is not intended to replace but rather supplement physical cash, the balance of private/public money in the total money supply will shift a bit more in favor of public money.

Why does that matter? Well, a few decades ago when cash transactions were far more common than now, and ‘fintech’ was not even a word yet, that balance was about 50/50. With increasing digitization it now sits at about 90/10. That means we have become so dependent on commercial banks, we barely have any workarounds left. (Try paying your taxes with cash euros for example. It won’t work.) This state of affairs benefits the banks, who get funded with your cheap deposits. And absent incentives to compete with each other on savings interest rates, banks end up running silent cartels. In for example the Netherlands this was already concluded by the national Consumer Affairs Authority. In most EU countries the market is dominated by 3 to 5 banks who together have over 90% of local market share.

Any mechanism that offers a path to sidestep the commercial banks with some of your wealth, be it a public savings bank, a full reserve bank, or a CBDC — will have a disciplining effect on bank’s competitiveness. It would put a bit of a brake on the practice of banks to take risks (issue credit) where the profits are for the shareholders and the (biggest) losses are socialized to taxpayers via bailouts. It would also boost societal resilience and incentivize banks to innovate and to adopt friendlier policies to small and medium businesses, and retail depositors. Citizens deserve to decide for themselves what percentage of their savings they wish to park in a risk-free environment (with low or zero interest rates) and what percentage they are willing to make available to commercial banks.

Another reason to be positive about the digital euro is the boost it gives to our digital autonomy. Currently 61% of card transactions and PIN payments in the euro area rely on Visa and/or MasterCard technology. Imagine the disruption if that ever stopped working, without a fallback solution. The payment rail underneath the digital euro can be that solution.

Risks and resistance

In previous surveys the main concerns raised were the programmability of money, and user privacy. The ECB has made progress there in the past two years. The current design pays attention to privacy, and prevents transaction-level surveillance or censorship. The ECB will not be able to track your transactions in a way that is linked to your identity. However, the commercial banks will — especially if traffic is handled through existing banking apps. That is no different or worse though than the current state of affairs with regular bank deposits.

As for programmability, this is not part of the design on the currency layer. ECB board member Piero Cippolone when asked about programmability mentioned interest in ideas around conditional payments, such as paying for a train ticket only if the train arrives on time. (This is reminiscent of smart contracts in crypto, which can do the same thing, and can release payment in any number of currencies.)

The ECB itself is primarily worried about financial stability. They fear that if too many people adopt the digital euro all at once, the outflow of bank deposits would destabilize the commercial banks. Banks could prepare for that through higher capital buffers (less leverage), or counterbalance the outflows with central bank loans, but this would reduce their profitability. Instead, under pressure from the banking lobby, the digital euro has been handicapped to reduce its immediate success. Specifically, digital euro accounts do not pay interest, and citizens can only hold up to €3,000 in such an account. Enough for daily use, but far from a savings tool. Over time the cap could be raised, but there is no timetable for this yet. However the cap is not set in stone. Cippolone in an interview explained that the current holding limit is just based on a rough calculation of existing cash divided by the estimated number of citizens that will use the digital euro.

Lastly, the progress on the design of this euro centered mostly around regulation and around managing the impact on existing stakeholders, but less on the technology itself. We know an online and an offline version are planned. And we know that the ECB wants to leverage the existing client relations (KYC) that commercial banks have with accountholders. What we don’t know for sure is what the payment rail will look like. Will it be on a public blockchain or on a private, centrally controlled infrastructure? How much of this will be open source? And will the offline version exist on cards, or in secure chips inside phones?

What is the status of the digital euro project? Will we get to use them soon?

Well, the latest official update as of now is from October 2025. It tells us that the preparation phase is almost over, the ECB is drafting the scheme rulebook, is testing use cases including the technical exploration of secure offline payments, and is finalizing five tender procedures. If all proceeds on schedule the digital euro would be actually rolled out in 2029 or 2030. However, the lack of legislative approval is now a roadblock.

Political roadblocks

The European Parliament (EP) has been sitting on proposed legislation for over two years, without making a decision. The point person in the EP is known as the ‘rapporteur’, that role is held by Fernando Navarrete Rojas (EPP, Spain) since the EP elections in 2024. Navarrete is highly skeptical of the digital euro project and has laid out his views publicly. These were then rebutted by the NGO named Positive Money Europe who argue among other things that payment systems are essential public goods, and help foster inclusion and resilience. Nevertheless, this lack of consensus will likely delay the legislative process further. Navarette now recommends freezing the work on the online version and only developing the offline version of the digital euro. For the online version he prefers to wait on private sector solutions like the European Payments Initiative (EPI) and perhaps Euro-stablecoins. (I plan to do a deep dive on stablecoin risks and possibilities soon). Some observers argue that the rapporteurs resistance is clearly in line with the agenda of the banking lobby and point out the imbalance in Navarette’s stakeholder engagements. Of the 82 meetings he held on the proposed legislation, only 2 were with NGO’s.

What is next?

In a statement on October 31st, a week after Navarrete's report, the ECB president Christine Lagarde made clear that the ECB is determined to continue and accelerate the digital euro project. She has the support of government leaders and of the progressive factions in the EP, but faces resistance from conservative factions. If all of this takes too long, the project may be overtaken by the development of Euro stablecoins and other private sector initiatives.

Whether the digital euro survives depends not just on the ECB, but on Europe’s willingness to treat money as a public good. The next two years will decide if this project is remembered as a turning point — or a missed opportunity.

SOURCES

1. Markets in Crypto Assets Regulation https://www.esma.europa.eu/esmas-activities/digital-finance-and-innovation/markets-crypto-assets-regulation-mica

2. The GENIUS Act — a comprehensive guide to US stablecoin regulation https://www.paulhastings.com/insights/crypto-policy-tracker/the-genius-act-a-comprehensive-guide-to-us-stablecoin-regulation

3. European Payments Initiative — the wero wallet https://wero-wallet.eu/

4. Netherlands Authority for Consumers and Markets https://en.wikipedia.org/wiki/Netherlands_Authority_for_Consumers_and_Markets and https://www.acm.nl/nl/publicaties/acm-spaarrentes-blijven-achter-door-te-weinig-concurrentie

5. European Banking Federation — Facts & Figures 2024 https://www.ebf.eu/wp-content/uploads/2025/05/EBF-Banking-in-Europe-Facts-Figures-2024-2023-banking-statistics-December-2024.pdf

6. European Central Bank report on card schemes and processors https://www.ecb.europa.eu/press/pr/date/2025/html/ecb.pr250228_1~7f0697af45.en.html

7. Bruegel think tank — interview with Piero Cippolone and Pablo Hernández de Cos https://www.bruegel.org/podcast/digital-euro-why-now-and-whats-next

8. ECB — The role of the digital euro in digital payments and finance https://www.ecb.europa.eu/press/inter/date/2025/html/ecb.in250228~7c25c90e4d.en.html

9. ECB third progress report on the digital euro preparation phase https://www.ecb.europa.eu/press/pr/date/2025/html/ecb.pr250716~463e72bbcb.en.html

10. Navarette, 2025. Do we really need the digital euro: solution to what problem exactly? https://institutodeanalistas.com/wp-content/uploads/8.-DO-WE-REALLY-NEED-THE-DIGITAL-EURO.-A-SOLUTION-TO-WHAT-PROBLEM-EXACTLY-FERNANDO-NAVARRETE-1.pdf

11. Positive Money: Navarette’s case against the digital euro misses the bigger picture https://positivemoney.org/eu/update/navarrete-s-case-against-the-digital-euro-misses-the-bigger-picture/

12. Euro summit meeting, 23 October 2025 https://www.consilium.europa.eu/media/g32prmym/20251023-euro-summit-statement-en.pdf

13. Helmich, 2025. Euro stablecoins are coming https://medium.com/unpegged/euro-stablecoins-are-coming-9713e62e52fb

For questions the author can be reached at editor@unpegged.blog