The digital euro explained

In today’s increasingly digital world, digital money is also becoming more important. This is why the European Central Bank (ECB) launched its Digital Euro Project in October 2021. The digital euro aims to bring the benefits of cash into a digital form, if introduced. Here we look at how the digital euro would work and what it could mean for everyday payments.

The digital euro is a type of central bank digital currency (CBDC) currently being developed by the Eurosystem of central banks. According to the European Central Bank (ECB), the digital euro would be a “digital form of cash, issued by the central bank and available to everyone in the euro area”*. If implemented, it could be used for any electronic payments in shops or online, or for transfers from one digital euro wallet to another. A digital euro would be free of charge and you could use it anywhere in the euro area, much like cash, once introduced. As society is becoming more digital every year, the ECB believes that this is the next logical step for the euro currency.

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

A digital euro would work much like cash, only in digital form. Consider what happens when you withdraw money from an ATM. Your bank account balance goes down and you receive banknotes that you can spend. With a digital euro, the same thing happens in that your digital wallet balance is debited when you pay. The key difference with the digital euro is that the money would remain digital, rather than converted into cash.

The following steps show the setup process:

• Set up your wallet: You could set up a digital euro wallet through a bank or post office. Those without a standard bank account may be able to access a basic digital euro account from the post office. Unlike a standard contactless digital wallet that holds money from your bank account, a digital euro wallet would store digital euros issued directly by the European Central Bank.

• Transfer money: You could add money to your digital euro wallet by linking your bank account and transferring funds. For people without a bank account, cash deposits are also an option. Once loaded, you could start using it as a digital payment method when you shop.

• Daily business: Whenever you receive money in digital euros, you could choose between keeping it in your digital euro wallet – up to a certain amount – or paying it into your bank account. You could do this manually or set it up automatically.

• Security: The digital euro is being designed with the safety of users’ personal data in mind. If you paid online, the ECB wouldn’t be able to trace your payments back to you. And you would also be able to make digital euro payments offline, the details of which would be private (as they are with cash).

No. Although it would be issued by the European Central Bank, as physical cash is, the digital euro would not replace the euro banknotes and coins you already use. It can simply be thought of as another way to pay that would be backed by the Eurosystem, the network of central banks that manage the euro.

The ECB president, Christine Lagarde, has described the digital euro as the “digital expression of cash”**.

“We will continue to have cash, and we will be issuing new banknotes in a few years’ time. But if people want digital cash, we should be able to offer a digital euro. We want to make sure that within the entire euro area there is a means of payment that is secure and works for online, peer-to-peer, and business transactions — and that’s the purpose of the digital euro.” – Christine Lagarde (July 2025).

**https://www.ecb.europa.eu/press/press_conference/monetary-policy-statement/2025/html/ecb.is250724~a66e730494.en.html

While the final functionality of the digital euro is still subject to legislative approval, the European Central Bank outlines the main features of a digital euro as follows:

• Accepted throughout the euro area: The goal is for the digital euro to be accepted everywhere in the euro area for goods and services. Under current proposals, merchants who already handle digital payments will generally have to accept the digital euro.

• Free of charge: Using a digital euro would be free of charge just like using banknotes and coins since a digital euro would be a public good. Plus, proposed legislation by the European Commission would require banks that distribute the digital euro to also provide basic digital euro payment services to their customers for free.

• Available offline: It is expected that the digital euro will function without an internet connection. However, this may be restricted to certain devices.

• Secure and private: Especially in offline mode, transaction details would only be known by the payer and payee. Safeguards would be in place to help prevent misuse and ensure compliance with anti-fraud requirements.

• Guaranteed value: The ECB intends for one digital euro to have the same value as a one euro coin. It would represent a non-volatile form of money.

• Limits: There may be a maximum amount of digital euros that an individual can hold to protect financial stability. An ECB study considered the effects of holding limits in the range of €1,000 to €10,000, but no concrete limit has been confirmed.

• Linked to bank: Your digital euro balance wouldn’t earn interest, but it would stay tied to your bank account so you can send or spend money without any extra steps.

• Regular and conditional payments: The digital euro would support recurring automated payments for things like monthly rent or bills. It would also enable conditional payments where your payment is completed only once certain conditions have been met or the service or goods have been provided.

Examples of digital money include central bank digital currencies (CBDCs) like the proposed digital euro, as well as cryptocurrencies like Bitcoin and stablecoins. Digital currency is money that exists only in electronic form. It can be used for online transactions or payments via digital networks. Unlike cash, digital money exists only electronically and cannot be withdrawn as notes or coins.

A central bank digital currency (CBDC) is a type of digital currency issued and controlled by a country’s central bank. For the eurozone, this is the European Central Bank (ECB). The ECB is responsible for the euro currency.

CBDCs may appear similar to cryptocurrencies at first glance, but the difference is that their value is fixed by the central bank and they are intended for making payments rather than speculating. Plus, CBDCs serve as public money and a modern, digital version of cash.

The digital euro is the ECB’s proposed CBDC. Its goals include:

• Financial inclusion: providing access to digital payments for everyone, even people who don’t have a bank account or have limited access to banking services.

• Payment efficiency: enabling fast, secure transactions across the euro area, reducing reliance on intermediaries like banks and payment processors.

• Monetary and financial stability: helping the ECB preserve the euro’s role, maintain trust in central bank money, and ensure a resilient payment system in a digital economy.

Society is becoming more digital every year. The same is true of consumers’ preferred payment methods. A widely available digital euro could bring several potential benefits, with two main stand-out points: financial innovation and access to central bank money in digital form.

Financial innovation

A digital euro would provide an additional, free-to-use means of payment across the euro area, with the intended outcome of making transactions easier and more inclusive. It would preserve privacy similar to cash and could help the euro adapt to modern payment preferences. The ECB’s stated aim is to strengthen the EU’s monetary sovereignty, partly by reducing dependence on non-European payment systems such as Visa. In doing so, the idea is to make the payment landscape more competitive and resilient.

Central bank money access

As things stand, cash is the only form of central bank money – money that is created at the ECB – that is available to citizens as a public good. In contrast, private money (such as a credit card balance) is typically mediated by commercial banks. By providing a digital euro, the ECB aims to combine the reliability of central bank money with today’s digital payment methods.

There is some uncertainty around a euro digital currency in Ireland, even though digital payments as a whole are on the rise. A study by the Banking & Payments Federation Ireland (BPFI) revealed that 1.6 billion contactless point of sale payments were made in the country in the year to June 2025. The same study showed that 23% were not planning to use the digital euro.

Cash still plays a key role in Ireland’s economy. In fact, according to Raisin’s 2024 Cash Ranking study, more than half of all in-store payments (54%) are still made in cash. So, despite increasingly digital spending habits, many Irish consumers continue to prefer physical money.

The Digital Euro Project was first launched in October 2021. The first phase of the project was a two-year investigation to explore how a digital euro could be used both by companies and citizens and what the impact on European society and the economy might be.

In October 2023, the Governing Council of the European Central Bank moved to the preparation phase, which involved:

• Finalising the digital euro scheme rulebook
• Selecting service providers to help develop a platform and infrastructure for a digital euro
• A closer look at technical aspects, including offline functions and developing a testing environment

In October 2025, the Governing Council agreed to move to the next stage, but there is still no guarantee that a digital euro will ultimately be issued. The ECB has talked of a pilot phase that could start as early as mid‑2027 to test functionalities. However, progress remains conditional on EU co‑legislators approving the digital euro regulations. The ECB expects that process to conclude in 2026 at the latest. A decision on whether to issue a digital euro will be considered by the Governing Council when the EU’s legislative process has been completed.

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