Piero Cipollone explains the rationale and benefits of the digital euro, emphasizing its role as a digital counterpart to cash that preserves Europeans’ freedom of choice in payments. As society shifts increasingly toward digital transactions, cash alone cannot meet consumers’ needs, particularly for e-commerce, peer-to-peer, and cross-border payments. Without a digital public payment solution, people are forced to rely on private, often non-European, payment providers, creating dependency, higher costs, and potential vulnerabilities.
The digital euro aims to provide a unified European payment solution that works everywhere in the euro area, complementing physical cash. Key use cases include point-of-sale transactions, online shopping, peer-to-peer transfers, and government payments. The system is designed to be simple, secure, and fast, accessible via banks or payment service providers through digital wallets or integrated apps. Two main payment methods are available: pre-funding a digital euro wallet or linking it directly to a bank account for seamless instant payments. Offline functionality will also allow private, anonymous transactions, ensuring both resilience and privacy.
Privacy protection relies on three pillars: technology (encrypted codes for payer and payee), regulation (strict access rules and auditing), and openness to future privacy-enhancing technologies. Offline payments remain fully anonymous, while online transactions maintain high privacy standards with anti-money laundering safeguards.
The digital euro project is on track technically but awaits legislative approval. The European Commission’s proposal (June 2023) is under review by the European Parliament and EU Council, with an expected legislative framework in the second half of 2026.
Banks have concerns about costs and potential disintermediation, but Cipollone notes these are addressed through safeguards and that banks will be compensated for services provided, with savings passed to merchants via lower fees. Merchants benefit through reduced fees, greater negotiating power, and simplified cross-border payment standards.
Importantly, the digital euro is not intended to replace cash. Physical cash remains central bank money, and the ECB is actively reinforcing its legal tender status. The digital euro complements cash, offering a digital form that ensures accessibility, privacy, and resilience in the evolving digital payment landscape.
