Digital euro banking.
Credit: T. Schneider – Shutterstock
The European Central Bank (ECB) is ploughing ahead with its plans to launch a digital euro by 2029, despite mounting concerns from lawmakers, banking associations, and privacy advocates about its impact on freedom and financial stability.
The proposed central bank digital currency (CBDC) is intended to provide a public, digital alternative to cash. However, critics warn it could give commercial banks problems and open the door to financial surveillance. ECB board member Piero Cipollone defended the plan during testimony before the European Parliament recently, claiming that the digital euro is a “public good” that would guarantee accessible payments, even during crises. “The digital euro will complement cash, not replace it, and will meet the highest privacy standards,” Cipollone assured, as he explained a possible offline payment version and a design where the ECB “will not know anything about the payer and the payee.”
ECB four-year roadmap to digital euro launch
The digital euro project began in 2020 with an ECB report spurred on by social distancing during the pandemic, followed by an investigative phase in 2021. After three years of technical testing and public consultations, the project entered the preparation stage in late 2023, with the ECB drafting a rulebook and putting forward legislative proposals. The current timeline requires the European Parliament, European Council, and European Commission to finalise legislation by mid-2026, followed by three years of infrastructure development, with the target of a 2029 launch.
The ECB expects the digital euro to be a fast, low-cost payment solution to improve financial inclusion and strengthen Europe’s monetary sovereignty amid the decline of cash use and the rise in private cryptocurrencies. It could also streamline cross-border payments within the Eurozone and encourage more economic integration.
Lawmakers and banks push back on digital euro plan
Despite these lofty ambitions, the digital euro faces fierce opposition. European parliamentarians argue that allowing citizens to hold central bank accounts could drain deposits from commercial banks and threaten their financial stability and ability to lend in the long term. The Association of German Banks has warned that deposit outflows could weaken customer relationships and raise lending costs and advocate for strict holding limits of €3,000 to €4,000 per user. The European Savings and Retail Banking Group also said that the digital euro could capture over a third of card transactions and erode banks’ revenue from payment fees.
A public consultation in 2021 returned with the highest number of respondents coming from Germany, the results of which were vague. Most who responded were in favour of the CBDC, but with very strict safeguards against privacy.
Waning global enthusiasm for digital cash
Globally, CBDCs are losing steam. Three years ago, over 170 projects were in development, but advanced economies like the United States, the UK, Canada, Denmark, and Sweden have scaled back or shelved plans, all claiming there are too many privacy concerns and not enough public demand. The UK House of Lords called CBDCs a “solution in search of a problem”, a sentiment echoed by some Eurozone critics who question the digital euro’s necessity given existing payment systems.
ECB’s digital euro plan still faces opposition
The ECB is still one of the few central banks in advanced economies committed to a retail CBDC, but its success depends on parliamentary approval, which could delay or radically change the project. Critics like economic researcher Julien Prat warn of potential runs on banks if depositors rapidly shift funds to digital euro wallets during crises, while others, like Jézabel Couppey-Soubeyran, say that the public is not convinced by the politicians over the potential privacy risks and still demands more solid safeguards.
For now, the digital euro represents a paradox: pitched as vital for Europe’s financial independence, yet deeply contested at home. As the ECB navigates the opposition, the project’s fate will depend on finding a balance in innovation with the concerns of banks, lawmakers, and, hopefully, EU citizens.