Given the absurdist nature of some of the online conspiracy theories surrounding the digital euro, it’s perhaps surprising that the proposed new currency is not even on the radar of many Europeans. On average, about one in three has not even heard of the digital euro,1 even though the work to ready this cash alternative has moved up a gear with the launch of a two-year preparation phase.
‘Over the next two years we will finalising the rule book and finetuning requirements and testing them to see if they align with the expectations of the market and our own policy goals,’ explained Sergio Gorjón, Head of Financial Innovation Division at Banco de España. ‘We will then be selecting partners to help deliver the infrastructure.’
Alex Stervinou, Director for Cash and Retail Payments Policy and Oversight Directorate at Banque de France, said this is the first third of the process, leading to a stabilised legislative framework in late 2025 or early 2026 and then a decision on whether to greenlight – or not. ‘Issuance would not be before 2027/8,’ he said.
This gives some time for regulators and bankers to educate consumers and merchants for the new currency, and give banks time to prepare for yet more payments disruption.
‘We are co-constructing with the private sector, and we are not against the commercial banks, nor are we short-cutting them,’ said Stervinou, addressing some industry concerns. ‘We want this two-tier system, and we want the commercial banks to have a leading role with the digital euro.’
Banque de France’s Alex Stervinou, talks collaboration and deposit outflow
Many issues have yet to be finalised, including holding and transaction limits, harmonising standards and protocols and working out how to re-use as much as possible existing infrastructure. ‘We don’t want to provide new payment rails but to integrate as much as possible into the existing ones,’ said Stervinou.
The digital euro is designed to be an alternative to cash, rather than replacing it, copying its unique features: privacy (via an offline mode), legal tender and free to use. It would also address what Stervinou said used to be a banned word – ‘sovereignty’ – as strategic independence is a hot topic in today’s turbulent world.
Alex Stervinou, Director for Cash and Retail Payments Policy and Oversight Directorate at Banque de France highlights that the digital euro is not an investment vehicle
‘Regulators often don’t appreciate that it takes a long time and a lot of investment for banks to develop anything and sometimes we have to secure funds and start building even before the regulations are baked and ready to go,’ said Bhatti.
Simon Eacott, Head of Payments at NatWest, agreed that more co-ordination of regulatory activity would reduce the burden on banks. ‘We need some air traffic control to make sure we’re doing the right thing at the right time.’
The success, or otherwise, of this new currency will be whether consumers are prepared to use it. Diederik Bruggink, Head of Payments, Digital Finance and Innovation at WSBI-ESBG, said it will be up to each individual to decide which payment method they want to use in each circumstance.
It remains to be seen how the digital euro will position itself and what its unique selling points will be as opposed to cards or instant payments. When we look at use cases, we see key differentiators are for offline transactions and international P2P transactions.
DIEDERIK BRUGGINK
Head of Payments, Digital Finance and Innovation at WSBI-ESBG
As the preparation phase unfolds, expect to start hearing a lot more about the digital euro – you can hear it directly from those in the know at MoneyLIVE Summit.
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