Do we need a digital euro?

The European Central Bank is moving the digital euro from policy discussion towards implementation. Its latest Digital Euro Scheme Rulebook goes deep into how the system would work, covering everything from customer journeys and APIs to merchant acceptance, fraud, disputes, settlement, security and certification. What is emerging looks less like another CBDC experiment and more like the foundations of a European public payments infrastructure.

There is a strong argument for doing this. Europe has its own currency and central bank, but much of its electronic payments infrastructure relies on private companies and international card and technology networks.

As cash declines, central bank money also becomes less relevant to everyday commerce.

A digital euro would give Europeans a digital equivalent of cash while creating a common payment layer across the euro area. It could increase competition, reduce merchant dependence on existing networks, improve resilience through offline payments and give European banks and fintechs common infrastructure upon which to build new services.

The argument against it is equally powerful because Europeans already have plenty of ways to pay. Cards, phones, wallets, instant payments and banking apps work extremely well, which means the ECB isn't entering an empty market. It is trying to persuade people to change behaviour when they have little reason to do so.

The OMFIF (Official Monetary and Financial Institutions Forum) and Imperial College modelling makes this point clearly: adoption will depend upon convenience, speed and friction rather than arguments about monetary sovereignty. If registration is cumbersome or making a payment takes longer than using an existing service, people will simply continue using what they use today.

The ECB can reduce that friction through waterfall mechanisms that automatically move money between bank accounts and digital euro holdings, while co-badging could make digital euros available through cards and wallets people already understand.

The problem is that this creates a paradox.

If the digital euro becomes almost invisible inside the payment products we already use, consumers may reasonably ask what benefit they are getting from this enormous new infrastructure.

There are banking implications too.

Moving commercial bank deposits into central bank digital money could affect bank funding, which is why holding limits and waterfall mechanisms matter.

Europe therefore has to create something attractive enough for people to use without making it so attractive that large amounts of money migrate away from commercial banks. Meanwhile, banks, PSPs, merchants and governments will carry the costs of building and operating the system.

For me, this is where the argument lands.

As European infrastructure, the digital euro makes sense. As a consumer product, the case remains unproven. Europe has strong reasons to control more of its own payment infrastructure, preserve public money in the digital economy and reduce dependence on non-European payment platforms. None of those arguments, however, gives a consumer a reason to change how they pay.

That is the challenge facing the ECB.

Central bankers can talk about sovereignty, resilience and monetary architecture, but consumers care about whether something is easier, faster, cheaper and accepted everywhere.

The ECB knows how to create euros. The harder task will be persuading Europeans that they need to use them.

 

Useful links to find out more:

https://www.ecb.europa.eu/euro/digital_euro/timeline/rulebook/html/index.en.html

https://www.ecb.europa.eu/euro/digital_euro/html/index.eu.html

https://www.ecb.europa.eu/euro/digital_euro/timeline/rulebook/html/index.en.html

https://www.omfif.org/2026/08/what-makes-or-breaks-the-digital-euro/

https://www.centralbank.tech/p/digital-euro-agent-based-modeling

https://github.com/calmitchell617/digital-euro-adoption