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By Sebastian Heidebrecht (Centre for European Integration Research, Department of Political Science, University of Vienna)

On 30 October 2025, the European Central Bank (ECB) announced the next preparatory phase and its readiness to introduce a digital euro in 2029. Unlike private forms of electronic money created by private banks, the digital euro will be a retail central bank digital currency (CBDC). As such, it will be directly available to citizens for everyday use. Unlike electronic money held in bank accounts, which is money created by the private banking system, the digital euro will be a direct liability of the central bank, like cash. Shortly before, on 23 October 2025, the European Council also signalledcontinuing support, highlighting the importance of the digital euro project for “a competitive and resilient European payment system” and “Europe’s strategic sovereignty and economic security”.

Down The Rabbit Hole? A Puzzling Policy Initiative

It seems the common currency is getting fit for the digital age, or are key European Union (EU) policymakers marching towards a digital Euroland? (Perceptive readers will note that I am referring to an earlier debate around the introduction of the analogue euro in the JCMS issues of June and September 1999.) A fictive wonderland, in which polarised politics, citizen concerns, and stakeholder interests do not play much role? It is essential to note that the issuance of the digital euro will depend on the success of an accompanying legislative package, which will, among other things, introduce the digital euro as a form of legal tender. Yet, CBDCs have long been met with considerable scepticism; inter alia, they are deemed “a solution in search of a problem”. Furthermore, the digital euro will require costly public infrastructure, marking a departure from the previous reliance on private actors and the general principle that state intervention should only occur in clear cases of market failure.

Perhaps most importantly, the digital euro project, and particularly the retail version, also poses several potential challenges, including public opinion. Banks and traditional payment providers may resist it to defend their business models. Populist parties may also oppose it and defend analogue cash against what they may perceive as an elite-driven project originating from Brussels and Frankfurt. In times of tight public budgets and rising Euroscepticism, the drive by the ECB and the Commission to introduce the digital euro seems particularly surprising. Why are the EU institutions advancing this project?

Through the Looking Glass: Why EU Actors Promote the Project

In a recent JCMS article, I examine the move forward of the digital euro project. I demonstrate the importance of how digitalisation, intertwined with geopoliticisation, impacts the euro area. Of course, innovation in the world of finance has long been closely tied to technological advancements. ‘Fintech,’ or the use of digital technology to provide financial solutions, may thus be only the most recent innovation in a long list of financial innovations. Yet, big platform companies have entered the sector, offering payment services such as Apple Pay, Google Pay, and Amazon Pay. These may, due to lock-in and network effects, consolidate markets and create potential oligopolies or even a monopoly in certain sectors. Furthermore, states are using digital financial technology to weaponize interdependence, as demonstrated by Russia’s exclusion from the SWIFT international payment system in March 2022.

Against this backdrop, important developments in the late 2010s and early 2020s encouraged EU policymakers to advance the project.

First, in 2019, Meta (formerly Facebook) announced its intention to introduce its own cryptocurrency, sparking significant debate among public officials about potential threats from private and/or foreign financial innovations, and demonstrating the need to keep pace with financial innovation.

Secondly, policymakers reconsidered the problematic fragmentation of the EU payment sector along national lines, which results in a reliance on a few international card companies, such as Visa and Mastercard. This issue has long been recognised, with repeated but unsuccessful attempts to integrate the euro retail payment market. The latest attempt of a private-run and publicly promoted initiative failed in 2022, revealing the challenges of a market-based European solution.

Third, EU policymakers increasingly aim to ensure monetary sovereignty and the public role of money, thereby safeguarding EU strategic autonomy. One argument presents the European payment sector’s dependence on foreign infrastructure and a few foreign private companies as problematic, particularly in a period of growing international tension. Ever since the prospect of a second Trump presidency in January 2025 emerged, EU officials in the Commission and the ECB have increasingly framed the digital euro in geopolitical terms.

Waking Up: Political Challenges and EU Politics

Yet, concerns remain. Far-right politicians mobilise against the project, inter alia claiming to defend an imaginary “fortress cash”, demanding a “no to CDBC”, and advocating the usage of crypto alternatives instead. The private banking sector is also sceptical about the project. In terms of EU bureaucratic politics, one of the most controversial issues for policymakers and the institutions involved is whether, in line with the Commission’s proposal on the digital euro, holding limits and the prohibition of remuneration should be addressed in secondary legislation. The ECB opposes these measures, arguing that such restrictions in secondary legislation are contrary to its monetary policy competences and may be necessary in exceptional scenarios, such as a negative interest rate environment. Yet, legislators defend them based on their structural impact on the financial system, which, as an economic rather than monetary policy, would be an issue of political concern.

Against this backdrop, it will be interesting to see if the digital euro project can overcome political challenges in the legislative process. Perhaps most importantly, many of the project’s controversial design features will affect whether and how the digital euro will be accepted and used by citizens. Ultimately, this will be the main benchmark for assessing whether we will find ourselves in a digital wonderland, in which the digital euro exists only in central bank drawing boards, or worse, is implemented but not used by anyone, or if we wake up in a world where the familiar euro has found an actual digital reflection.

Sebastian is a Postdoctoral Researcher at the Centre for European Integration Research, housed in the University of Vienna’s Department of Political Science. His research looks at how actors, processes, and institutions shape the digital transformation of European economies and societies, with a particular focus on European Union policies. Website: https://eif.univie.ac.at/heidebrecht/index.php LinkedIn: www.linkedin.com/in/sebsebastian-heidebrecht-22194066

The post Ready to Introduce a CBDC – or ECB in Digital Euro Land? appeared first on Ideas on Europe.

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