Europe towards a paradigm shift: digital meets traditional currencies

The European Union has laid the groundwork for a revolution in the payment system. The European Council has formalized its negotiating position on the regulatory framework for the digital euro, while simultaneously creating legal guarantees to protect cash as legal tender. This is a strategic move that repositions the economic autonomy and security of the European monetary system in the face of global digital transformation.

The dual role: digital and traditional hand in hand

The decision establishes a clear hierarchy: the digital euro will function as a complementary tool to cash, not as a replacement. Citizens and businesses will be able to use it for online and offline transactions across the euro area, even without an internet connection, while banknotes and physical coins will retain their status as the sole official legal means of payment.

The European Central Bank (ECB) will directly issue the digital euro, thus preserving central bank money as a pillar of system trust. At the same time, retail merchants and services will not be able to refuse cash, with limited exceptions for remote sales and fully automated systems. Member states will need to continuously monitor access to physical coins and prepare emergency plans to ensure circulation in case of digital payment system failures.

Privacy, limits, and value protection

Those who own payment apps or digital wallets will benefit from high privacy standards. The digital euro will coexist with private payment solutions, such as bank cards and applications, without monopolizing the market. A crucial aspect concerns quantitative limits: the ECB will set a maximum cap on digital euros held in wallets to prevent the new instrument from being used as a store of value, thus protecting financial stability. These limits will be reviewed at least biennially.

Regarding fees, payment service providers will not be allowed to charge costs for basic operations such as opening digital wallets, closing them, and executing payments. Fees applied to merchants will follow a transitional period of at least five years, during which they will remain aligned with the costs of comparable payment instruments, then be calculated based on actual costs.

The European Central Bank’s vision

Piero Cipollone, a member of the ECB Executive Committee, highlighted how the digitization of payments and the development of distributed ledger technology are radically transforming the concept of money. Without active intervention by central banks, traditional forms of money issued by public institutions risk losing relevance in the digital economy. The feared alternative is a Europe dependent on foreign and private payment solutions, including stablecoins pegged to the dollar.

The transformation timetable

The ECB has outlined a two-phase strategy. By 2026, the institution will begin preparations for issuing the digital euro for retail payments and the central bank money settlement for transactions based on DLT technology. Simultaneously, it will develop cross-border instant payments through the integration of the TIPS system with payment infrastructures of other countries.

Pilot operations with the digital euro could start around mid-2027, with the first actual issuance expected in 2029. In October 2025, the ECB has already concluded framework agreements with companies tasked with developing the fundamental technical elements of the new currency.

Towards the European Parliament

The next phase will involve negotiations between the EU Council and the European Parliament. The final decision on issuing the digital euro remains at the ECB’s discretion, subject to the approval of the regulatory framework and the readiness of technical infrastructures.