FRANKFURT AM MAIN, GERMANY – JANUARY 23: Christine Lagarde, President of the European Central Bank … [+]
As central bank digital currencies emerge worldwide, different jurisdictions seek to create different variants of CBDCs. As we enter 2025, the Eurozone is one of the largest economic zones in the world – and with a consolidated monetary system oriented around the European Central Bank (“ECB”), there is more than enough ground to cover what is happening with CBDCs in Europe.
What’s the current status of the Digital Euro? Can I buy Digital Euro?
Currently, the Digital Euro has not been launched – though there are signs that a launch may be coming sooner rather than later. By October 2025, the ECB has indicated a second phase of the preparation for the Digital Euro. By then, the ECB will have prepared an outreach plan, procurement standards, and technology providers. Currently, the Digital Euro is in the preparation phase, and nobody can buy or access it. The project has already started handing out private contracts worth over a billion Euros sourcing private vendors to help build the system up though.
Christine Lagarde, the President of the European Central Bank, has said, “We need to prepare our currency for the future” and further elaborated that the “[ECB] envisage[s] a digital euro as a digital form of cash that can be used for all digital payments, free of charge, and that meets the highest privacy standards. It would coexist alongside physical cash, which will always be available, leaving no one behind.”
So far, in the 26 years of its history, the European Central Bank has had only four Presidents, with Christine Lagarde ascending in 2019. Her predecessor, Mario Draghi, lasted the full eight years of his term, though the Eurozone crisis cut through the ECB. Lagarde will likely stay throughout the Digital Euro preparation phase, a project she has been firmly behind, with about two-and-a-half years until her eight-year term. And it’s not just her – many of the central bankers who are essential constituents of the European Central Bank are planning with her how to sell the Digital Euro to the public – and any successor is likely to be favorable to the Digital Euro.
Why has the Digital Euro been cited as needed?
Central banks around the Eurozone have cited the need for the Digital Euro based on the declining use of cash in society and the rise of private solutions such as cryptocurrencies. There is a significant premium on keeping money outside the private sector’s hands – with stablecoins like Libra/Diem (Facebook’s project) being cited.
What are the potential downsides of the Digital Euro?
The Digital Euro has potential downsides, many of them echoed in the other launches of central bank digital currencies. For example, the central bank will become a technology company focused on procurement with central points of failure. This was a breeding ground for corruption for the bureaucrat fortunate enough to make these technical choices in China.
While the Digital Euro is slated to “coexist” with cash, this also comes when EU nations are voting on ending end-to-end encryption (a critical digital privacy tool) and have started to restrict cash with limits being placed on how much you can spend in cash to accelerate its slow demise.
How is privacy built for the Digital Euro?
User privacy is said to be the ECB’s “chief concern” as it has been designing the central bank’s digital currency. For example, the ECB has a page on privacy, and the Digital Euro with the ECB describing it as pseudonymous and “cash-like.”
Certainly, the ECB is aware of public perception that runs the opposite and has negative surveillance, control, and privacy implications in mind. The ECB has been at pains to say that the Digital Euro will “coexist” with cash and that unlike the e-CNY (China’s CBDC) it will not be tied to a “social credit” score or place limits on how money is spent. Yet, Europe’s actions on the attempted ending of end-to-end encryption seem to indicate an attitude of “privacy for me, but maybe not for you” among lawmakers and regulators- especially ironic for a jurisdiction whose “executive branch”, the European Commission, was sued for secret texts to private companies.
So, while the ECB has painted a picture that the Digital Euro “will be governed by EU regulations designed to balance privacy with security,” these words may not mean much considering the broader European context.
While the ECB may be separated from the European Commission, its privacy landing page is a case of having cake and eating it too. After all, a cash-like system precludes pseudonymity at scale – rather, it is anonymous and noisy in most instances. And while data is entrusted to “commercial banks” rather than the central bank itself, that is a distinction that can quickly blur. Clearly, the ECB expects commercial banks to enforce money laundering statutes, so pairing data on who has access to the commercial banking system with the central bank’s systems seems like a no-brainer. This is the famous “legitimate backdoor” – if you trust the state and commercial banks with your data instead of withdrawing your bank reserves into cash.
How are Bitcoin, stablecoins and central bank digital currencies like the Digital Euro different?
A big part of the ECB’s drive towards the Digital Euro is to compete and pry Europeans away from Bitcoin, cryptocurrencies, and “stablecoins” such as the one that Facebook/Libra proposed. What is the difference then between these three?
Central bank digital currencies are a direct liability of the central bank. Since the central bank has the power to issue currency, this means (for example, in China) that the central bank can essentially create “digital euros” if it wishes to. The architecture and data within a central bank digital currency are usually built completely by the central bank supported by private vendors of its choice. In China, the central bank has turned away from a distributed ledger technology to a centralized data store, in which the technical details are pretty scant. Hence, the central bank controls everything, and the system has no external access. It seems likely that the Digital Euro will go down that same path.
Stablecoins are tokens, such as USDT (Tether) and USDC (Circle), that private companies control. Famously, Facebook proposed a stablecoin called Libra that quickly faded from view. Stablecoins assume the existence of a company that will issue you back reserves (for example, US dollars) at a fixed ratio if you request them for their tokens.
Most cryptocurrencies operate suspiciously like a stablecoin, with an identifiable CEO/founder and a company that acts as a centralizing chokepoint – except for Bitcoin, whose founder Satoshi has left billions in Bitcoin untouched. In self-custody and your wallets, Bitcoin is the only cryptocurrency at a scale that can promise decentralization and the ability to choose your privacy and censorship-proof payments, no matter what political tides may come.
It’s likely that we’ll have more clarity on the Digital Euro by later this year – while progress has been described as “accelerated” – the European Commission (the executive wing of European policy-making) and the European Parliament (the legislative wing of European policy-making) have made clear that whether or not a Digital Euro is launched is a decision of the European Central Bank. However, the preparation phase is not the final determination as to whether a Digital Euro will be launched, and the ECB will need a legal framework from the European Commission and European Parliament to launch it.
