As anticipated, the governing council of the European Central Bank approved the initiation of a policy monitoring phase for the digital euro. This new preparation period will run through November 1, 2026, extending over about two years. The ECB began its work at the end of 2019 and has since completed the research phase that started in October 2021. Meanwhile, the European Commission presented a bill last June outlining the legal framework for the digital euro, which will be discussed by the European Council and Parliament. The final decision on creating the digital currency rests with the ECB, but it cannot be made until the legal framework is adopted.
Fabio Panetta, the ECB’s executive adviser overseeing the study, stated in May that the digital euro could appear in the market around 2026 or 2027, counting from this October. Some sources close to the process have suggested a potential delay until 2027 to 2030. Juan Ayuso, General Manager of Operations at the Bank of Spain, hinted at this at a Cunef conference in July: a new phase named preparation would begin in October. There is no fixed duration, but historical preparatory phases of this scale have lasted roughly five and a half to six and a half years.
Thus, the current phase aims to: finalize the rules governing the digital euro; identify the providers responsible for building the technological platform and infrastructure; and collect evidence to ensure the currency meets requirements for user experience, privacy, financial inclusion, and environmental impact. The aim is to shape a currency ready for the future, enabling digital payments to be free and secure while upholding the highest privacy standards. It will coexist with physical cash, ensuring no one is left behind, according to a note released by ECB President Christine Lagarde on behalf of the organization.
Reasons and usefulness
The current monetary value held by the public is fully guaranteed by the central bank in the form of euro coins and banknotes. While households and businesses hold private money through banks, they can convert it into public money by withdrawing cash. In this way, public money serves as a monetary anchor because merchants can accept payments knowing they can exchange them for public money. This underpins its function as a unit of account with prices expressed in euros. The surge in digital payments, accelerated by the pandemic, has driven central banks to explore digital currencies to preserve this anchor in a changing payments landscape.
The digital euro is designed to be accessible to citizens for person‑to‑person payments, at physical points of sale, and in public sector transactions. It would resemble cash in its compulsory use, while also supporting both physical and digital businesses, with some small exceptions, and functioning without an internet connection in certain situations. It could be accessed via bank apps or a dedicated ECB wallet. People without bank accounts could also use it, for example through cards issued by public institutions like the postal service. It would be possible to convert it back into cash at ATMs.
Challenges and advantages
Several technical and operational challenges remain, including ensuring the security and privacy of payments. A major concern is preventing the public from moving large sums from private banks to the central bank, which could affect banks’ ability to issue loans. If deposits fall, liquidity and solvency could be at risk and inflation policy transmission could be altered, complicating monetary management. To address these issues, some proposals suggest putting a cap on digital wallets, potentially around 3,000 euros, while larger transactions could be linked to bank accounts for compatibility with existing payment rails.
In the Eurozone, payment ecosystems vary by country, with some regions less advanced than others. A universal European digital payment method could enhance cross‑border transfers and payments, while improving financial inclusion for those without bank accounts through public‑institution cards. Another potential benefit is increased strategic autonomy in payments, reducing reliance on foreign providers in the European payment landscape.