In today’s fast-evolving digital landscape, where payments are becoming faster, smarter, and increasingly fragmented, cash is quietly losing ground. Consumer cash usage in Europe now accounts for only 17%, down from 38% in 2022. What used to be the cornerstone of monetary systems is now a shrinking piece of the puzzle—especially in regions like Europe where seamless, tech-driven payment methods are rapidly gaining ground. 

Add to that, the rise of decentralized “currencies” like Bitcoin and Ethereum, and central banks worldwide are feeling the pressure. They’re now tasked with safeguarding the financial system while trying to remain relevant in a world that’s growing less dependent on traditional money. That’s where Central Bank Digital Currencies (CBDCs) come in. 

Why CBDCs—and why now? 

CBDCs are not just about digitizing cash. They represent a broader ambition: to modernize national currencies, make cross-border payments more efficient, reduce reliance on private-sector digital wallets, and ensure that public money remains a viable and trusted option in the digital economy. 

Europe, known for its pioneering approach to data protection and responsible tech regulation—from GDPR to the AI Act—is naturally taking a nuanced approach to facilitate the adoption of their CBDC, the Digital Euro (D€). It is the EU’s most ambitious attempt yet to establish a sovereign digital currency framework, tailored to European values of privacy, inclusion, and interoperability. 

What’s the vision behind the Digital Euro? 

Launched as a program in 2023, the Digital Euro initiative is a multi-year project designed not just to offer another way to pay, but to reinforce Europe’s monetary autonomy. By reducing dependency on non-European payment providers, especially in light of rising geopolitical uncertainties, the Digital Euro aims to become a secure, accessible, and trusted digital form of public money—complementing, not replacing cash. 

It’s also an effort to make EU-wide digital payments more standardized and cost-effective, while upholding the privacy and trust that Europeans rightfully expect. 

A rollout that requires precision and partnership 

While digital payments have become ubiquitous in certain circles, the idea of rolling out the Digital Euro isn’t as simple as flipping a switch. Integrating a new digital currency into the fabric of Europe’s diverse payments landscape—across 20 member states, each with unique consumer behaviors and banking ecosystems—is an enormously complex task. 

To navigate this, the European Central Bank (ECB) has adopted a phased and collaborative approach. We’re currently nearing the end of the preparation phase, which focuses on identifying key design elements, consulting with stakeholders, and stress-testing assumptions. This process is essential to ensure that the Digital Euro is both technically sound and socially accepted. 

Here are a few highlights from the ongoing work:

1. A rulebook in the making

Much like Single Euro Payments Area (SEPA) helped harmonize payments across the EU, the Digital Euro will be governed by a detailed rulebook. It will define the standards and processes intermediaries must follow, from onboarding users to executing transactions. Importantly, both public and private sector voices are shaping this document—making it a truly cooperative effort. 

2. Listening to the people who will use it

The ECB has actively engaged with citizens, merchants, and businesses through surveys, focus groups, and even an ongoing online user community. The aim? To ensure the Digital Euro doesn’t just work—but works well for the people it’s meant to serve. Inputs from these interactions are being used to design multiple facets of the Digital Euro and the role of intermediaries in disbursing them. 

3. Balancing privacy and safety

Privacy has been a top concern—and rightly so. Offline Digital Euro transactions are expected to offer a level of privacy akin to cash. Online payments, meanwhile, will include safeguards like user anonymization. 

4. Setting the right limits

To avoid unintended consequences—such as massive capital flight from commercial banks—the ECB is evaluating a holding limit per user, e.g., €3,000. It’s a delicate balance: keep the limit too low, and you undercut usability. Set it too high, and you risk destabilizing the financial sector. 

Lessons from early movers—who stands to gain or lose? 

Other CBDC pilots offer useful clues. One takeaway: the Digital Euro must offer real, tangible benefits—like privacy, incentives, or seamless integration—to compete with established digital wallets and payment platforms. 

Also, while the two-tier distribution model (where central banks issue and intermediaries distribute) helps maintain existing banking roles, it must be fine-tuned to avoid disadvantaging specific players in the payment ecosystem as there will be newer overlaps in responsibilities and conflicts of interests. 

Let’s be clear: this isn’t a zero-sum game. But the Digital Euro will reshape the competitive landscape. 

Banks, for instance, may face deposit outflows, particularly in uncertain times when users might view the Digital Euro as a safer haven. To stay ahead, they’ll need to rethink their engagement strategies, invest in new infrastructure, and innovate services beyond simple transactions. 

Payment Service Providers (PSPs) are poised to take on a more central role. With oversight from the ECB, they’ll need to up their game in know your customer (KYC), fraud detection, and compliance—while finding new ways to generate value, given that basic services will need to remain free for users. 

Final thoughts 

The ECB is expected to finalize the Digital Euro’s design elements by end of 2025, aligning with the broader EU legislative framework. Until then, we can expect: 

• • Continued refinement of the rulebook, incorporating wider stakeholder feedback 

• • Deeper studies into the impact on vulnerable groups and small businesses 

• • Greater clarity on technical partners through the Digital Euro Service Platform (DESP) procurement process 

• • Ongoing efforts to raise awareness and build trust in the Digital Euro among EU citizens 

The Digital Euro isn’t just a technological upgrade—it’s a once-in-a-generation shift in how money is issued, used, and perceived in Europe. Getting it right means respecting the complexities of the existing system, while boldly embracing the future. 

With our decades of experience in payments, we see the Digital Euro not as a threat, but as an opportunity—to build a more resilient, inclusive, and forward-looking financial ecosystem. The challenge now is to ensure the transition is seamless, stakeholder-driven, and—most importantly—anchored in the real-world needs of European citizens and businesses. 

If you’d like to learn more, please reach out to Nils and myself.