FAQs on a digital euro

Updated on 4 September 2024

Q1. Why would Europe need a digital euro?

Digitalisation is changing the way we pay. The use of cash to make payments is declining and the coronavirus (COVID-19) pandemic has accelerated the shift towards online shopping and digital payments. A digital euro would be an electronic form of cash for the digitalised world. It would give consumers the option to use central bank money in a digital format, complementing banknotes and coins.

A digital euro would make people’s lives easier by providing something that does not currently exist: a digital means of payment universally accepted throughout the euro area, for payments in shops, online or from person to person. Like cash, a digital euro would be risk-free, widely accessible, user-friendly and free for basic use.

Moreover, a digital euro would strengthen the strategic autonomy and monetary sovereignty of the euro area by boosting the efficiency of the European payments ecosystem as a whole, fostering innovation and increasing its resilience to potential cyberattacks or technical disruptions, such as power outages.

Further information on why we need a digital euro.

Q2. How could a digital euro contribute to Europe’s strategic autonomy?

A digital euro would offer a pan-European payment solution, available throughout the euro area, under European governance. It could therefore help reduce Europe’s dependence on private, non-European payment providers, while acting as a counterweight to their market dominance. In turn, a digital euro would make the European payments landscape more competitive and innovative by offering a platform that makes it easier for payment service providers to offer pan-European solutions of their own.

Overall, a successful digital euro could turn Europe into a global frontrunner in digital finance and central bank digital currencies.

Q3. Would a digital euro replace cash?

No. A digital euro would complement cash, not replace it. A digital euro would exist alongside cash in response to people’s growing preference to pay digitally, in a fast and secure way. Cash would continue to be available in the euro area, as would the other private electronic means of payment currently being used.

Q4. Would a digital euro be an alternative currency within the Eurosystem?

No. A digital euro would be another way to pay using the euro, our single currency, in Europe. It would be convertible one-to-one with banknotes. A digital euro would respond to people’s and firms’ growing preference to pay digitally.

Q5. Where does the digital euro project currently stand?

After a two-year investigation phase, the ECB’s Governing Council decided to proceed to a preparation phase, which started on 1 November 2023.

The preparation phase is focused on further developing and testing a digital euro, in line with the design choices and technical requirements defined during the investigation phase.

In this context, the Eurosystem is carrying out extensive analysis, testing, experimentation and stakeholder engagement, to ensure the digital euro meets the highest standards of quality, security and usability.

The current phase will last for two years, finishing at the end of 2025, at which point the Governing Council will decide whether to move to the next phase of preparations and, if so, define its scope and duration.

A decision on whether to issue a digital euro will only be considered by the ECB’s Governing Council once the relevant legislation has been adopted.

Q6. How are European legislators involved in the process?

On 28 June 2023, the European Commission presented a draft legislative proposal for a possible digital euro. The purpose of the legislation is to ensure that any future digital euro would give people and businesses an additional choice to pay digitally using a widely accepted, cheap, secure and resilient form of public money anywhere in the euro area.

The two processes – legislation and digital euro design – will develop in parallel so that the Eurosystem can be in a position to promptly issue a digital euro, if and when the decision is warranted once the legislative framework for the digital euro has been adopted.

The Eurosystem will consider any necessary adjustments to the design of a digital euro that may emerge from legislative deliberations. The ECB also stands ready to provide support and technical input during the legislative process, as required.

The ECB’s Governing Council will decide on whether to issue a digital euro only after the legislative act has been adopted.

Q7. Who is involved in the digital euro project?

The Eurosystem – the ECB and the national central banks of the euro area – must ensure that a digital euro meets users’ needs. For this reason, the Eurosystem engages regularly with policymakers, legislators, market participants, civil society organisations and people who would ultimately use the digital euro.

This engagement takes place in different contexts, such as the Euro Retail Payments Board, a forum chaired by the ECB, which brings together payments market stakeholders; and the Rulebook Development Group, which includes representatives from the Eurosystem central banks and the European retail payments market (see Q20).

The ECB also regularly engages with:

• private companies, which provide feedback on the technical aspects of a digital euro, based on their market knowledge and expertise;
• European civil society organisations via seminars, to listen to their views and foster an open dialogue;
• potential end users through surveys, interviews and focus groups, to understand their needs and preferences.

The ECB regularly participates in Eurogroup meetings with the finance ministers of euro area countries and presents the latest digital euro project updates to the European Parliament.

In the past, feedback was also gathered via the Market Advisory Group, comprising experts who provided input on the product design and distribution of a digital euro during the investigation phase.

Read more about project governance and stakeholder engagement.

Q8. Who would be able to use a digital euro?

As stated in the legislative proposal presented by the European Commission, a digital euro would be made available to people, businesses and public entities that reside or are established in a euro area Member State on a temporary or permanent basis.

People who travel to the euro area for personal or professional purposes, or who used to reside or be established in a euro area country, may also have access to the digital euro.

Moreover, people, businesses and public entities residing or established outside the euro area may access the digital euro by opening digital euro accounts with payment service providers established or operating in a country which is a Member of the European Economic Area or in a third country, subject to a prior agreement concluded between the EU and third countries, and/or arrangements concluded between the European Central Bank and national central banks in non-euro area Member States and in third countries.

Q9. Why would people want to use a digital euro?

A digital euro would be a payment solution for every occasion, for use anytime and anywhere in the euro area. It would be a universally accepted digital means of payment that consumers could use free of charge in shops, online or from person to person. It would give people the option to pay digitally, while still using a public means of payment. And it would be available both online and offline.

A digital euro would be designed to provide a higher level of privacy than other digital payment methods typically offer. The Eurosystem would not identify people based on their payments. Moreover, personal transaction details from offline digital euro payments would be known only to the payer and the payee.

A digital euro would be safe and easy to use and would also seek to promote digital financial inclusion by ensuring that no one is left behind. A digital euro would accommodate the needs of people with disabilities and those with no access to a bank account or lacking digital or financial skills.

To ensure a digital euro would be usable and accessible throughout the euro area, the draft legislative proposal presented by the European Commission foresees mandatory acceptance by merchants and mandatory distribution by supervised intermediaries to their clients.

Q10. What value would a digital euro bring to merchants?

A digital euro would be a truly pan-European solution, accepted throughout the euro area. It could provide an easier and cheaper alternative to the currently fragmented payments landscape in which merchants work. A digital euro would put merchants in a stronger position to negotiate conditions with payment solution providers and thus reduce their own costs.

A digital euro could also contribute to higher conversion rates for merchants. This is particularly relevant for online shopping, as customers are less likely to turn down a purchase if they are familiar with the payment instrument. Moreover, a digital euro would also allow merchants to receive payments instantly without any additional costs.

Q11. What value would a digital euro bring to intermediaries?

Supervised intermediaries, such as banks, would have a key role in the distribution of a digital euro. They would act as the main point of contact for individuals, merchants and businesses for all digital euro-related issues and would perform all end-user services.

A digital euro would allow intermediaries to have immediate reach throughout the entire euro area, unlike most private innovations, which tend to focus on specific domestic markets. Thus, a digital euro could serve as a platform for intermediaries to foster further innovation and competition in the growing e-commerce and digital payment markets across the euro area.

A digital euro could also bring additional business opportunities for intermediaries. For instance, as proposed by the Eurosystem, if merchants outside the euro area wanted to operate in digital euro, they would need to have an account with a payment service provider from the euro area.

Moreover, the digital euro compensation model, as currently foreseen in the European Commission’s draft legislative proposal, provides intermediaries with economic incentives comparable to other digital means of payment. In this regard, a digital euro also opens the door for intermediaries to invest in additional value-added services for their customers.

Q12. Would people have to pay to use a digital euro?

A digital euro would be a public good. It would therefore be free for basic use by individual users.

Banks or payment providers could offer their customers additional, paid digital euro services. These added services would make a digital euro even more appealing for users, offering features such as the ability to split bills among friends or make recurring payments.

Q13. How would a digital euro work?

A digital euro would allow people to make secure instant payments in physical and online stores and between individuals, irrespective of the euro area country they are in or their payment service provider. The ECB is currently exploring how this could work in practice.

The first step would be to set up your digital euro wallet through your bank or a post office.

Once your digital euro wallet is set up, you could put money into it via a linked bank account or by depositing cash. You could then start making payments using the digital euro in your wallet.

Whenever you receive money in digital euro, you would keep it in your digital euro wallet, up to a certain limit, or deposit it in your bank account. You could either do this manually or set it up automatically.

Digital euro payments would always be safe and instant – whether in physical stores, online shops or between people.

A digital euro would offer both online and offline functionalities, meaning you could use it even when you have poor or no network reception. Moreover, personal transaction details of offline digital euro payments would only be known to the payer and the payee, providing a cash-like level of privacy.

Further information on how a digital euro would work.

Q14. How private would a digital euro be?

Privacy is one of the most important design features of a digital euro.

The digital euro design includes an offline functionality that would offer users a cash-like level of privacy, both for person-to-person payments and for payments in physical shops. The use of digital euro for offline payments would not involve sharing personal transaction data with payment service providers (PSPs), the Eurosystem or any potential providers of supporting services.

For online digital euro payments, privacy would be implemented so that the Eurosystem itself – the issuer and payment infrastructure provider – would not be able to directly connect transactions to specific individuals.

Find out more about digital euro and privacy.

Q15. How would the ECB ensure that a digital euro is inclusive?

A digital euro would be a public good, like banknotes and coins are today – but in a digital form.

A digital euro would be free for basic use, via a mobile app or a physical card, by people who want to use it. A digital euro would also work offline, in case users have limited connectivity.

The draft legislation presented by the European Commission establishes that credit institutions distributing a digital euro would be required to provide basic digital euro payment services for free when requested by their customers.

Moreover, to ensure that everyone – including people with disabilities, those with functional limitations or limited digital skills, and elderly people – can pay using digital euro, public entities, such as post offices, will be identified in each euro area country. These entities would provide people vulnerable to digital financial exclusion with free support and access to digital euro services, such as face-to-face support and dedicated assistance when opening a digital euro account and using all basic digital euro services. Free access to the basic services of a digital euro would also be offered to people without a bank account.

Moreover, a particular focus will be placed on the inclusion of vulnerable groups, such as individuals with no fixed address, asylum seekers or beneficiaries of international protection.

A digital euro would be designed to accommodate the needs of everyone, leaving no one behind.

Q16. Would a digital euro be programmable money?

A digital euro would never be programmable money.

Programmable money is a digital form of money used for a predefined purpose, like a voucher, with limitations on where, when or with whom people can use it.

As also envisaged in the digital euro legislative proposal presented by the European Commission, a digital euro would not be programmable money but could facilitate automated payments, if users want to use this function. For example, a user could decide to set up an automatic monthly payment to instantaneously transfer digital euro to family members or friends.

Q17. Would intermediaries be compensated for distributing a digital euro?

Pending the final legislation, the Eurosystem proposes a compensation model that would create fair economic incentives for payment service providers, like banks, to address the operational costs of distributing a digital euro.

As is currently the case with other payment systems, payment service providers distributing a digital euro would be able to charge merchants for these services. Price setting for merchants and payment service providers would be subject to a cap, as proposed by the European Commission in their digital euro legislative proposal.

As with the production and issuance of banknotes, the Eurosystem would bear the costs of the establishment of a digital euro scheme and infrastructure. Moreover, the Eurosystem would aim to minimise additional investment costs for intermediaries by re-using existing infrastructures as much as possible.

Q18. Would a digital euro pose a threat to financial stability by disintermediating banks?

Our financial system – with the banking system at its centre – functions well, and the Eurosystem wants to preserve the key role banks play in ensuring the efficient provision of credit to the real economy.

The ECB has made the following design choices to minimise any potential risks a digital euro may pose to the financial system.

• Users would only be able to hold a limited amount of digital euro in their account. This would ensure that a digital euro would be a safe store of value, similar to cash, thereby preserving the stability of our financial system and preventing outflows of bank deposits, even in times of crisis.
• Linking their digital euro wallet to a bank account would allow users to make payments over the holding limit and cover any shortfall instantly, without having to pre-fund their digital euro wallet (assuming sufficient funds are available in the linked account).

As with cash, no interest would be paid on digital euro holdings.

Q19. How would the ECB ensure that digital euro payments work in the same way throughout the euro area?

Supervised intermediaries (like euro area banks) would be responsible for distributing a digital euro. To ensure the digital euro scheme is implemented in the same way across the entire euro area, the Eurosystem is designing a digital euro rulebook that consists of a single set of rules, standards and procedures for the standardisation of digital euro payments, ensuring pan-European reach.

Q20. How is the digital euro rulebook being developed?

The Eurosystem has established a Rulebook Development Group to draft the digital euro rulebook with input from various stakeholders.

The group, which consists of representatives from the Eurosystem central banks and the European retail payments market, including consumers, retailers and intermediary associations, is working on the basis of the digital euro design choices that have already been approved by the ECB’s Governing Council.

Dedicated workstreams have been created within the Rulebook Development Group to work on sections of the rulebook that require particular expertise.

Further information on the digital euro rulebook.

Q21. What would be the link between instant payments and a digital euro?

Today, consumers rarely have the option to use instant payments when paying in shops, which also means that merchants don’t receive their money immediately. A digital euro would change that – all digital euro payments would be instant.

The single set of rules, standards and procedures developed and, if approved, implemented for a digital euro would mean that instant payment solutions could be further developed to reach all euro area countries. This would reduce the dependence on private non-European companies that are currently dominating the payments sector.

Q22. Would a digital euro be based on a distributed ledger technology such as blockchain?

The Eurosystem is experimenting with different technologies – both centralised and decentralised – in the development of a digital euro, including distributed ledger technologies. However, a decision has not yet been taken.

Q23. Would the introduction of a digital euro make payments in Europe more vulnerable to cyberattacks?

As with other digital infrastructures, a digital euro could be a target for cyberattacks. To mitigate this risk, the design of a digital euro would rely on state-of-the-art technologies that would create a cyber-resilient and future-proof environment.

Q24. How would a digital euro be different from stablecoins and crypto-assets?

A digital euro would be central bank money. This means that it would be backed by a central bank and designed to meet the needs of the people using it. As such it would be risk-free. Moreover, it would respect privacy and data protection. Central banks have a mandate to maintain the value of money, whether it be in physical or digital form.

The stability and reliability of stablecoins ultimately depend on the entity that issues them and the credibility and enforceability of their pledge to maintain the money’s value over time. Private issuers may also use personal data for commercial purposes.

There is no identifiable entity that is liable for crypto-assets, which means that claims cannot be enforced.