Facebook first announced plans for a digital currency called Libra in June 2019. Around the same time, many central banks began evaluating the possibility of issuing their own digital currencies. Facebook ultimately paused the Libra project in early 2022 due to resistance from authorities, but a number of monetary institutions pressed ahead with their own work. The path to a digital euro remains gradual, and it may be some time before eurozone residents see digital euros in their wallets, with a proposed initial limit of 3,000 euros per wallet in principle. Between 2027 and 2030, sources familiar with the European Central Bank’s terms have indicated a timeline under discussion.
ECB executive advisor Fabio Panetta, who led the work, stated in May that a digital euro could launch within three to four years from October. Yet insiders note deadlines may extend if developments demand acceleration. Juan Ayuso, the chief operating officer of the Bank of Spain, mentioned at a Cunef conference in July that October would likely mark a transitional phase called preparation. He noted that there is no fixed duration for this stage, and past projects of similar scale have seen preparation stretch five and a half to six and a half years.
The ECB began its exploration at the end of 2019, with the investigation phase running from July 2021 to October. In parallel, the European Commission introduced a legislative proposal for the regulatory framework of the digital euro last June. The plan now awaits deliberation by the Council and the European Parliament. The final decision regarding the issue of a digital euro rests with the ECB, but that decision awaits the approval of the legal framework. Ayuso warned that issuance is not imminent and will not occur in the short or medium term.
payment anchor
To grasp the pace, it helps to understand that the only money currently guaranteed by central banks is physical cash: euro coins and banknotes. Funds held in banks are private money that can be exchanged for public money by withdrawing cash when needed. Public money serves as a monetary anchor because merchants accept it in exchange for goods and services, knowing it can be converted into cash. This anchoring supports the euro’s role as a unit of account, helping set prices in euros. As Ayuso put it, payments must be reliable even when the electricity grid or digital infrastructure falters.
The surge in digital payments during the pandemic prompted central banks to consider digital currencies to preserve this monetary anchor role. A digital euro would aim to replicate cash’s function by ensuring financial stability, price integrity, operational continuity, and strategic autonomy for Europe’s payment system. The reliance on major payment vendors such as Visa, Mastercard, or PayPal, many of which are outside the euro area, poses geopolitical and operational risks if sanctions take effect. A digital euro could also provide a secure option in the face of potential crypto market volatility or disruptions to payment networks, even offering offline payment capabilities. If other nations issue their own digital currencies and Europe does not, the euro’s international standing could be affected.
Advantages and risks
What would a digital euro mean for Europeans? The European Commission has proposed that the digital euro be offered free to citizens, with mandatory participation by most physical and digital businesses (subject to exceptions for very small entities) and distribution primarily through banks. Spain already hosts one of the continent’s most developed payment ecosystems, and the benefit would extend to other euro-area countries with less mature systems. A universal European digital method could streamline cross-border transfers and payments, while enhancing financial inclusion for people without bank accounts who wish to participate in digital payments. A formal presentation is anticipated, highlighting digital financial innovations spanning the entire euro area.
Why the slow pace? The project touches many technical and operational questions, including how to secure and protect payment privacy, which technology will be used, and whether the ECB will issue its own digital wallet. A key concern is preventing a rapid shift of funds from banks to the central bank. If banks lose deposits, lending could falter, affecting liquidity and solvency across the economy. Additionally, the impact of ECB interest rate actions on loan and deposit prices complicates efforts to curb inflation. For this reason, discussions include a potential wallet cap of around 3,000 euros, while larger payments would link back to traditional bank accounts to ensure continuity of access to financing.