Digital euro

What it means

The digital euro is a planned digital form of cash that the European Central Bank would issue. People and businesses could pay with it throughout the euro area via a digital wallet on their phone or a card, online and in shops, and it is meant to work even without an internet connection.

Unlike money in a bank account, which is a liability of a commercial bank, the digital euro would be a direct liability of the central bank, just like banknotes. It is meant to complement cash, not replace it, and to respond to payments being increasingly dominated by private card schemes and tech platforms.

It differs from cryptocurrencies and stablecoins issued by private entities. The project has completed the ECB's preparation phase, but issuance can only be decided once an EU legal framework is adopted, setting matters such as holding limits and privacy rules.

How it works in practice

Merchants would generally have to accept the digital euro, much like cash, with exemptions for the smallest firms that do not accept digital payments. The proposal caps acceptance fees so they are lower than for card payments.

Banks and payment institutions would distribute the digital euro, offering wallets linked to current accounts. For businesses it would mean updating till systems and terminals, as happened with the introduction of instant payments or the SEPA standard.

To protect banks from deposit outflows, a limit on how many digital euros an individual can hold is planned. Any excess would move automatically to a linked bank account, so in practice it would mainly be a means of payment rather than savings.

What to watch out for

Common concerns relate to privacy. The ECB says offline payments should offer privacy close to cash and that the central bank will not see online payments by individual, but anti-money laundering rules will still apply.

The final design may still change, so businesses need not prepare right away. It is worth following EU legislation and bank offers and, when renewing till systems and terminals, choosing solutions that can easily be extended to new payment methods.