EU Institutions Challenge the Merits of the Digital Euro

The digital euro has faced a difficult path to fruition, with many of Europe’s leading financial institutions questioning whether a central bank digital currency (CBDC) can deliver real value to EU citizens.

Discussions around the project began in 2020, as lawmakers explored ways to provide EU consumers with a digital alternative to cash. The initiative also aimed to counter the growing influence of foreign currencies and payment systems, including the extensive global networks established by Visa and Mastercard.

In response, several major EU banks banded together to launch Wero, a payments rail designed to enable consumers to pay-by-bank across the region. Now, this same group of lenders—including Deutsche Bank, BNP Paribas, and ING—are voicing concerns that the digital euro could ultimately undermine private sector payment systems like Wero.

A Rocky Road

This challenge is only the latest in what has been a rocky road for the digital euro. After the European Central Bank (ECB) began a preparation phase for the CBDC two years ago, there was speculation that the digital euro could be launched as soon as this year.

However, that timeline has since been revised, with a pilot program now expected in 2027 and a full launch projected for 2029.

As the program has been delayed, concerns about privacy and security have grown. Because the EU government would have the ability to track transactions made with digital euros, many member states have questioned whether officials might misuse this functionality to surveil citizens.

Adding to the tension, a recent ECB system outage left trillions of euros in limbo, raising further doubts about the initiative’s security and reliability. EU nations have also struggled to reach consensus on key details, including how the digital euro should be issued and how many tokens each resident should be allowed to hold.

A Moot Point

One of the most damning critiques of the digital euro is that it is superfluous. In a statement to the ECB, the group of financial institutions that backed Wero argued that the CBDC largely replicates existing private solutions without offering any additional value to consumers.

While a government-backed digital currency could offer certain advantages, the long runup to the digital euro’s launch gives private sector companies ample time to develop products that could make the CBDC a moot point.