Will the digital euro ensure European sovereignty in payments?

The purpose and benefits of the digital euro

The digital euro would provide consumers with a common way to make digital retail payments, independent of American payment cards. The payment system would be under European control. The digital euro would also reduce payment costs and act as an anchor for the European economy. In January 2025, ECB President Christine Lagarde and European Commission President Ursula von der Leyen wrote in an opinion piece on the digital euro project, highlighting the importance of the independence of European payment systems, especially in the current geopolitical climate.

Project timeline

The European Central Bank (ECB) launched a project on the digital euro in July 2021. In November 2023, a two-year preparatory phase for the transition to the digital euro began, during which the ECB intended, among other things, to finalize the rulebook for the digital euro and select the technologies and suppliers to be used for the system components under the ECB's responsibility. In October this year, the Governing Council of the ECB decided to move to the next phase of the project. During the next phase of the project, the ECB will continue preparations and build its own technical and operational capabilities required for being ready to start piloting digital euro in 2027. The next major milestone will be the voting on the digital euro legal framework in the Committee on Economic and Monetary Affairs (ECON) of European Parliament. That is expected to take place in May 2026. If the legal framework will be approved during 2026, the ECB anticipates issuance of digital euros to start potentially in 2029.

How the digital euro works

The digital euro is like cash but in digital form. Like cash, it would not be commercial bank money on the balance sheet of credit institutions, i.e. banks, but central bank money on the balance sheet of the central bank. Credit institutions would not be able to use deposits in digital euros in their own lending. Banks would also not pay deposit interest on the digital euro.

In the first phase, the digital euro could be used in payment applications for payments between consumers, payments in online stores, payments to authorities and payments in physical stores. The digital euro is not initially designed for use in business-to-business payments or automated payments between devices. The digital euro could be used either via a digital wallet, a mobile app or a physical payment card.

Assessing the digital euro: Is it the right solution?

However, is the digital euro the right or best solution to ensure the independence and sovereignty of European payments? According to BearingPoint's latest payment methods survey, consumer awareness of the digital euro has increased over the past year, and every third euro area citizen who responded to the survey would use the digital euro as a means of payment if it were available now. However, consumer attitudes towards the digital euro vary by region:

• In countries where cash is more common, such as Germany and Austria, the digital euro would probably be used more often than in countries where digital payment instruments such as payment cards and mobile payments are already widely used.
• For example, in Finland, more than half of respondents are still unable to say how often they would use the digital euro.

From merchants’ perspective, the digital euro is a welcome addition to the payment portfolio if the promises of lower costs are realised. The overall impact, however, depends on the extent to which the digital euro would eventually replace other, more expensive payment methods for commercial purposes. Commercial banks have raised their concerns on the significant investment required by the digital euro implementation in relation to the expected benefits.

Other European payment initiatives

In addition to the digital euro, other projects are underway in Europe to create a European payment system. SEPA instant transfers and mobile payments play a key role in these. The most significant step forward so far was on 23 June 2025, when the European Payments Initiative (EPI), supported by 16 European banks and payment service providers, and the European mobile payment services consortium EuroPA announced a strategic partnership to create an interoperable, sovereign European digital payments system, bringing together the EPI-launched Wero mobile payment service and regional mobile payment services across Europe, including Bancomat, Bizum, Blik, MB WAY (SIBS) and Vipps Mobilepay. This partnership covers a large part of Europe, including large markets such as Germany, France, Italy and Spain, as well as the digitally advanced Nordic and Benelux countries.

It therefore offers a potentially credible alternative to American card schemes. Implementation phase of a common technical hub enabling interoperability of the European mobile payment services is expected to start in December 2025.

In addition, banks have become more active in exploring and introducing new payment services based on new forms of digital money, including stablecoins and tokenised deposits. In these initiatives the banks address primary the use cases related to business-to-business payments as well as the novel, digital-native use cases like agentic payments. Examples of these initiatives include Commercial Bank Money Token by leading German banks and consortium on nine major European banks to issue a euro-denominated stablecoin in the second half of 2026.

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