Digital Euro Project Advances Amidst Debate on Sovereignty, Privacy, and Financial Stability

Piero Cipollone, an ECB executive board member, stated that a digital euro would diminish Europe’s dependence on non-European providers and enable Europeans to utilize sovereign central bank money within the digital economy. The ECB maintains that the digital euro would be suitable for Europe, providing an additional method for everyday transactions with central bank money as payments transition online. The ECB further clarified that the digital euro would complement, rather than replace, physical banknotes and coins. Cipollone highlighted that a primary rationale for issuing a digital euro is to safeguard the advantages of cash in the digital era.

However, an alternative perspective suggests that a Central Bank Digital Currency (CBDC) could restrict citizens' financial autonomy. Pius Sprenger, a former managing director at Deutsche Bank, reportedly characterized statements about the digital euro protecting Europeans as a threat to freedom. Spanish financial commentator José Vizner indicated that the digital euro would permit control over spending and that the ECB would establish limits on digital money. Vizner also noted that while banknotes can be tracked, traced, and frozen, the digital euro is inherently trackable despite privacy assurances. Concerns regarding government overreach and surveillance have been raised by privacy advocates regarding CBDCs.

In the United States, President Donald Trump signed an executive order in January to prohibit CBDCs, citing potential threats to the financial system, individual privacy, and national sovereignty. Subsequently, a US CBDC ban until 2030 was formalized in housing bill legislation.

The European Consumer Organization (BEUC) identified potential benefits for users, with Andrew Canning, BEUC deputy head of communications, suggesting the digital euro could offer a secure and inclusive payment option, particularly for those facing barriers to digital payments. The EU’s privacy watchdogs, including the Data Protection Supervisor (EDPS) and the European Data Protection Board (EDPB), have emphasized the necessity of robust safeguards and a high level of privacy to foster public trust in the digital euro. The ECB’s privacy documentation indicates that offline payments would offer cash-like privacy and that the bank would not access personal transaction data. Canning expressed BEUC’s satisfaction with the proposal and its confidence that consumer safeguards would be protected during negotiations among EU lawmakers.

The digital euro would be denominated in euros and issued by the central bank, distinguishing it from privately issued stablecoins such as Tether or USDC. Consumers would access the digital euro through their existing banks or payment providers, utilizing electronic wallets for various transactions. The underlying money of the digital euro would be a liability of the ECB, which supporters argue provides the same public backing as cash.

The banking industry has raised concerns that a shift to central bank digital euros could reduce bank deposits, potentially impacting their ability to offer loans. Lorenzo Bini Smaghi, an Italian economist and former ECB executive board member, indicated a high risk of financial instability with significant repercussions for the real economy. The ECB has stated that design choices have been made to minimize potential risks to the banking sector, including limiting users to a small amount of digital euros in their wallets to prevent excessive outflows of bank deposits and stating that no interest would be paid on digital euro holdings.

The ECB estimates the digital euro will require an investment of approximately 1.3 billion euros ($1.5 billion), with ongoing operating costs estimated at around 320 million euros ($370 million) annually. Commercial banks and payment providers face implementation costs ranging from $4.6 billion to $6.9 billion.

Lawmakers across the European Parliament, EU member states, and the European Commission have initiated negotiations on the digital euro legislation, aiming for an agreement within the next six months. Cipollone stated in an interview that they hope the text will be finalized by the end of the year, with a decision on the future issuance of the digital euro to follow. If legislation passes, the ECB’s Governing Council will decide on a launch, potentially in 2027, making it unlikely for Europeans to encounter the digital euro before 2029, if approved.

Globally, over 100 countries initially explored Central Bank Digital Currencies (CBDCs). Most have either abandoned their plans or shifted towards a wholesale model. Few CBDCs currently in production have achieved widespread adoption. China began piloting its digital yuan (e-CNY) in 2019, subsequently rolling it out across the country, processing trillions of yuan in transactions. However, Chinese consumers predominantly favor existing payment applications like Alipay and WeChat Pay. The Bahamas launched the Sand Dollar in 2020, becoming the first nation with a nationwide retail CBDC, aiming to enhance financial inclusion, though adoption was slower than anticipated. Nigeria’s eNaira, launched in 2021, faced challenges in gaining traction despite government backing. Brazil’s central bank discontinued its Drex CBDC platform in 2025, citing cost and privacy issues. The Bank for International Settlements (BIS) concluded in 2023 that retail CBDCs represent complex endeavors for central banks and other entities.