There is, at present, one single European means of payment that we can use throughout the euro area: namely our euro banknotes and coins. In Germany, cash is still the chief payment method at the point of sale. However, it is slowly but steadily losing its significance as digitalisation advances. For this reason, we in the Eurosystem want to create a digital means of payment that is accepted throughout the euro area and is based on a European legal and regulatory framework that guarantees a high level of privacy.

With the digital euro, we will be able to make payments at the point of sale, online, at public authorities and from person to person everywhere in Europe – regardless of whether or not we have internet access at that moment in time. Buying everyday necessities with the digital euro will be just as easy and convenient as paying by card. The underlying infrastructure will be made available to banks and other payment service providers free of charge by the ECB. 

The digital euro will be accepted everywhere

Unlike when using other payment methods, acceptance of the digital euro will be almost universal. This is because, in all euro area countries, the digital euro will become legal tender alongside euro cash. The legislative proposal only provides for exceptions in the case of smaller merchants who do not accept cashless payments.

Even people without a bank account or smartphone will be able to use the digital euro – a degree of inclusion that only cash has guaranteed so far. Neither at present nor in the foreseeable future will there be another European payment instrument that is so versatile and which combines the advantages of existing cash and cashless payment methods.

High dependencies in payments

For now and in the near future, too, the only payment solutions coming close to achieving what the digital euro will be able to do are conceived by non-European providers. They dominate the payments industry in Europe. In the euro area, international card systems alone process two-thirds of all payments; in some European countries, almost all. On the back of this market power, US providers are able to charge commercial banks and merchants high fees.

Europe needs its own digital payment solution

The digital euro is intended to strike a balance between rewarding banks and other payment service providers in Europe for issuing the digital euro and keeping merchant fees within acceptable limits. Apart from that, it is of strategic importance that we are not unilaterally dependent on foreign countries when it comes to a critical infrastructure such as payments. Europe needs its own digital payment solution.

Interaction between the private sector and central banks

Like cash, the digital euro will be brought into circulation by credit institutions and other private payment service providers. In view of this aim, we in the Eurosystem have been working closely with all stakeholders ever since the digital euro project began. This cooperation takes place on the Euro Retail Payments Board and in the national payment forums, as well as in the Rulebook Development Group, a working group dedicated to creating a common regulatory framework for using the digital euro.

The idea behind this collaboration is to uphold the existing interplay between the private sector and central banks in the payments sphere. For example, anyone who looks more closely at euro area clearing and settlement systems will find that, in addition to the Eurosystem’s T2 and TIPS, there also exist private sector systems such as EBA Clearing. At the same time, new private sector initiatives are under development, such as the European Payment Initiative (EPI)’s “Wero”, which is now being rolled out in five euro area countries. A digital euro could in fact benefit from this, as it could be integrated into the Wero wallet.

Holding limits must be set

The design process for the digital euro is ongoing. One key issue is the setting of holding limits, intended by legislators to protect commercial bank deposits and thus lending, too. Eurosystem experts are currently exploring how high these holding limits should be. Their findings will be presented in spring 2025. The waterfall approach will also allow payments to be made that exceed the holding limit. For this to work, though, the user’s digital wallet must be linked to their current account.

Framework conditions such as these will ensure that commercial bank money fundamentally remains the best way of storing value. The plan not to pay interest on the digital euro is certainly another key factor here. I am confident that the digital euro will become a standard means of payment that works virtually everywhere – just like its twin in the analogue world, cash.