A Rocky Road for the Digital Euro

The digital euro has encountered numerous challenges on its path to implementation, with prominent European financial institutions expressing skepticism about the potential benefits of a central bank digital currency (CBDC) for EU citizens.

Initial discussions around this initiative began in 2020 as lawmakers sought ways to provide EU consumers with a digital alternative to cash. The project also aimed to counter the increasing influence of foreign currencies and payment systems such as Visa and Mastercard’s extensive global networks.

In response, several leading EU banks formed Wero, a payments network designed to enable cross-border bank-to-consumer payments within the region. Now, these same banks—such as Deutsche Bank, BNP Paribas, and ING—are concerned that the digital euro could ultimately undermine private sector payment systems like Wero.

Delays and Concerns

This challenge is merely the latest obstacle in what has been an arduous journey for the digital euro. Two years after the European Central Bank (ECB) initiated a preparation phase, there was optimism that the CBDC could launch as early as this year. However, timelines have since been revised, with a pilot program now expected to begin in 2027 and a full implementation projected for 2029.

The prolonged delay has exacerbated concerns about privacy and security. The EU government’s ability to track digital euro transactions has raised questions among member states regarding the potential misuse of this functionality for citizen surveillance.

Additionally, an ECB system outage that left trillions of euros in limbo highlighted further doubts about the initiative’s reliability. EU nations have also struggled with reaching consensus on key aspects, such as how the digital euro should be issued and how many tokens each resident should be allowed to hold.

Is the Digital Euro Superfluous?

Critics argue that the digital euro is redundant. In a statement to the ECB, financial institutions supporting Wero maintained that the CBDC largely duplicates existing private solutions without adding significant value for consumers.

While a government-backed digital currency could offer certain benefits, the extended lead-up to its launch gives private sector companies ample time to develop products that may render the CBDC unnecessary.