17 Jul This is the digital euro

This summer, chances are you booked your holiday through an online platform. You may also have made a purchase from an e-commerce website in recent weeks. In both cases, however, there was one payment option you did not have: public money. You could not pay with money issued directly by the European Central Bank—that is, with cash.

Most of us hardly notice that an ever-growing share of our economic activity now takes place in digital environments where public money is simply unavailable. Neither you nor I can use cash for the overwhelming majority of online purchases.

At the same time, we have become increasingly aware of the growing difficulties involved in accessing and using cash. Over the past decade, the number of ATMs has fallen sharply, while many bank branches have made both cash withdrawals and deposits more cumbersome. Moreover, an increasing number of physical retailers have imposed restrictions on cash payments that go beyond the regulatory thresholds established to combat money laundering and tax evasion.

The overall outcome is clear: in the analogue world, paying with public money—cash—is becoming progressively more difficult; in the digital world, it is impossible. As a result, citizens’ freedom to choose how they make or receive payments has been significantly reduced, and in the digital economy it has effectively disappeared.

This raises an obvious question: what distinguishes cash from the money held in our current accounts, which we use for bank transfers, card payments and other electronic payment instruments?

The essential difference is that cash is issued directly by the central bank. It is a liability of the central bank itself and therefore constitutes public money—money that cannot disappear because central banks cannot fail. By contrast, the balances we see in our bank accounts are private money, created by commercial banks.

Under normal circumstances, one euro in cash and one euro in a bank account are indistinguishable to the public. Regulation, supervision and deposit guarantee schemes—covering deposits of up to €100,000—ensure that confidence. Yet banking crises remind us that these two forms of money are not identical. Whenever confidence falters, depositors instinctively seek to convert private money into public money by withdrawing cash, a behaviour that can further destabilise the banking system.

If access to cash continues to decline while public money remains absent from the digital economy, today’s only form of public money risks becoming increasingly marginal, with potentially far-reaching consequences.

Meanwhile, the rapid development of private digital assets—particularly stablecoins—poses new challenges for the future of the monetary system. These assets already offer functionalities that traditional payment instruments cannot always match. At the same time, they carry risks of monetary fragmentation and the progressive displacement of public money, potentially taking us back to a world resembling the eighteenth century, characterised by recurring banking crises before central banks introduced public money in the form of banknotes. The cash we use today has not always existed, and it is worth remembering why it was created.

Against this backdrop, the European Union has decided to act.

During the previous legislative term, the EU adopted the Markets in Crypto-Assets Regulation (MiCA), which is already in force and currently under review, to strengthen the resilience of stablecoin issuers and minimise the risk of failure in this rapidly evolving market. At the same time, the European Commission proposed a complementary legislative package aimed at reinforcing both the distribution and acceptance of cash and the introduction of a new form of public money for the digital economy: the digital euro. That, fundamentally, is what the digital euro is—a digital equivalent of cash.

At the end of June, the European Parliament adopted its negotiating position on both the digital euro legislation and the regulation strengthening the legal tender status of cash. The Council had already agreed its own position last December. Interinstitutional negotiations are therefore now underway, with the objective of reaching agreement before the end of the year, allowing the European Central Bank to continue its pilot project with a view to making the digital euro available to the public by 2029.

By then, citizens will be able to decide whether to hold part of their savings—and make their everyday payments—in private money issued by commercial banks or in public money, either in the form of cash or digital euros. The current de facto prohibition on using public money for digital payments will have disappeared. Digital euros will be available for payments, transfers and receipts throughout the digital economy.

The digital euro will also offer many of the functionalities currently provided only by private digital assets, particularly stablecoins, while safeguarding European monetary sovereignty and ensuring that monetary policy remains effective in an increasingly digital economy.

Moreover, digital euro payments will be possible both online and offline. Online transactions will benefit from accounting records protected by privacy standards significantly stronger than those currently applying to commercial bank payments. Offline payments, requiring no internet connection, will provide a level of privacy comparable to that enjoyed when paying with cash, while remaining subject to equivalent anti-money laundering safeguards.

The digital euro will also introduce an additional payment rail, increasing competition in the payments market and helping to reduce merchants’ costs. Businesses are expected to benefit from a fee structure that is consistently more favourable than those offered by existing private payment solutions, many of which are controlled by US companies. In today’s geopolitical environment, Europe’s heavy dependence on foreign payment infrastructures represents a strategic vulnerability that should not be underestimated.

Finally, strengthening the legal framework protecting cash will improve both its availability and its practical usability, reversing a trend of gradual erosion over recent years. Cash in the hands of the public remains essential—not only for economic reasons but also for social and territorial cohesion. The revised legal tender regulation is designed precisely to reinforce that right.

This is what the digital euro is about. And I hope that both you and I will soon be able to enjoy its benefits.