Introduction to Digital Euro
The European Central Bank (ECB) is working on introducing a digital euro, a central bank digital currency (CBDC) for the eurozone. This project aims to "bolster Europe’s unity, safeguard our autonomy and strengthen our resilience," according to Piero Cipollone, an ECB executive board member. Cipollone emphasized the importance of a single currency, stating that it "has a strong geopolitical dimension" and is "a commitment to stability, to unity and to a shared European destiny."
Geopolitical Context
The development of the digital euro comes at a time of heightened tensions in the region, with Estonia, Latvia, and Lithuania, all European Union (EU) member states and eurozone members, bordering Russia. The introduction of a digital euro is seen as a way to reduce dependence on non-European payment solutions and to strengthen Europe’s sovereignty. As Cipollone noted, "The euro is more than just a currency. It is a commitment, a commitment to stability, to unity and to a shared European destiny."
Benefits of Digital Euro
The digital euro is expected to have several benefits, including increased competition, lower fees for merchants, and improved consumer protection. It will also provide a secure and reliable means of payment, even in the event of a cyberattack or other crisis scenarios. Cipollone highlighted the digital euro’s "three critical features": its distributed infrastructure, a dedicated digital euro app, and the ability to function offline.
Distributed Infrastructure
The digital euro’s infrastructure will be distributed across at least three regions, each equipped with multiple servers. This will ensure that digital euro payments can continue even in the face of a cyberattack or other crisis scenarios. As Cipollone explained, "So in the face of a cyberattack or one of many other hypothetical crisis scenarios, digital euro payments can continue – disruptions should not bring the system to a standstill."
Digital Euro App
The ECB will provide a dedicated digital euro app, which will allow people to switch seamlessly between providers. This means that users will be able to continue using their digital euro even if some providers are hit by an outage. Cipollone noted that this feature will provide an additional layer of security and reliability.
Offline Functionality
The digital euro will also function offline, adding another layer of security and reliability. This feature will enable users to make payments even without an internet connection, ensuring that the digital euro remains a viable means of payment in all scenarios. As Cipollone stated, "Even if the internet is down, ATMs are out of order or you have no phone signal, you will still be able to pay with digital euro."
Legislative Progress
The introduction of the digital euro is contingent on the adoption of a legal framework. While progress has been slow, European Commissioner for Economy and Productivity Valdis Dombrovskis noted that there is a growing urgency to reach a political agreement and address the remaining open issues. The EU’s current Danish Presidency aims to reach a common approach in the Council by the end of the year.
Innovation Platform
The ECB has also established a digital euro "innovation platform" to explore possible applications of the digital euro. This platform has already led to the development of several innovative solutions, including conditional payments and improved inclusion and accessibility. The ECB will announce details on the experimentation’s second round in the first half of 2026.
Conclusion
In conclusion, the digital euro is a project that aims to strengthen Europe’s unity, sovereignty, and resilience. With its distributed infrastructure, dedicated digital euro app, and offline functionality, the digital euro is expected to provide a secure and reliable means of payment. While legislative progress has been slow, there is a growing urgency to reach a political agreement and address the remaining open issues. The ECB’s innovation platform has already led to the development of several innovative solutions, and the digital euro is expected to have a significant impact on the future of payments in Europe.
