The European Central Bank (ECB) took a historic step in October 2020 by launching the digital euro investigation phase, a formal exploration of how a central bank digital currency could work across the euro area. The decision followed months of research, public consultation, and a changing global financial landscape accelerated by the COVID-19 pandemic.
With lockdowns and social distancing pushing consumers and businesses toward contactless and online payments, the use of cash fell sharply across Europe. This shift underscored a growing concern within the ECB: that if digital payments were dominated by private or foreign providers, Europeans might lose access to risk-free central bank money in digital form.
ECB President Christine Lagarde described the project as a “natural response to digitalisation” and a way to ensure Europe’s monetary sovereignty in a fast-evolving financial environment. “A digital euro would be a symbol of European integration in the digital age,” Lagarde said when announcing the investigation phase.
The project aimed to answer key questions about how a digital euro could complement cash, protect user privacy, and prevent financial disruption. The ECB stressed that it was not seeking to replace banknotes but to offer a secure digital alternative backed by the central bank.
Throughout 2020, the ECB worked closely with the European Commission and national central banks to study potential models. The central issue was whether the digital euro should be account-based, like a traditional bank deposit, or token-based, resembling digital cash. Both approaches had implications for security, privacy, and ease of use.
At the same time, other major economies, including China and the United States, were advancing their own digital currency experiments. The People’s Bank of China had begun pilot programs for its digital yuan, adding urgency to Europe’s efforts.
The ECB’s decision to move forward marked the beginning of a multi-year process toward a possible launch later in the decade. The investigation phase was set to run for two years, with findings expected to shape Europe’s most ambitious monetary innovation since the creation of the euro itself.
The move confirmed a new reality: the digitalisation of money was no longer theoretical. The question was no longer if Europe would create a digital euro — but how and when.