Central bank digital currencies, or CBDCs, are moving from theory to reality as governments rethink how money should function in an increasingly digital and geopolitically fragmented world. In Europe, this debate has crystallised around the digital euro, a proposed public digital form of cash issued by the European Central Bank.
At its core, a CBDC is digital public money, a direct claim on a central bank, designed to complement cash and commercial bank deposits. Unlike cryptocurrencies, CBDCs are issued by the state, anchored to monetary policy and embedded in existing legal frameworks. More than 130 jurisdictions are now exploring or piloting CBDCs, according to international surveys, reflecting growing concern about payment sovereignty, financial stability and reliance on private or foreign infrastructures.
CBDCs as strategic infrastructure
The global push toward CBDCs is not driven only by technology. It is also shaped by geopolitics. Sanctions regimes, the dominance of the US dollar, and dependence on international payment networks such as SWIFT have highlighted how financial infrastructure can be used as a tool of power. In response, several countries have accelerated work on sovereign digital currencies to reduce external dependencies and preserve control over domestic and cross-border payments.
In this context, CBDCs are increasingly viewed as strategic infrastructure. They can enable instant settlement, programmable payments and resilience in times of crisis. At the same time, they allow central banks to modernise public money without handing control to unregulated crypto assets or large private payment platforms.
The digital euro’s role
The digital euro fits squarely within this global trend, but with a distinct European approach. The ECB has consistently framed it as digital cash, designed to ensure that citizens retain access to central bank money as payments become increasingly digital. It is not intended to replace cash, but to complement it and safeguard choice.
European policymakers also see the digital euro as a response to growing dependence on non European payment providers. Card schemes, wallets and mobile payment apps used across the euro area are largely operated by foreign companies. A digital euro could provide a neutral, pan-European payment option under public governance, supporting the EU’s broader goal of strategic autonomy.
Privacy and trust are central to the project. The ECB has repeatedly stated that the digital euro would offer higher privacy than existing electronic payments, while still complying with anti-money laundering rules. This balance reflects Europe’s regulatory culture, which prioritises consumer protection and data safeguards alongside innovation.
Risks and open questions
Despite its potential, the digital euro raises complex questions. Banks worry about disintermediation if consumers shift deposits into central bank money. Lawmakers debate limits on holdings, offline functionality and the role of intermediaries. Public awareness remains low, and scepticism persists around surveillance and state control.
These challenges explain why progress has been cautious. The ECB is still in a preparation phase, working alongside the European Commission and Parliament on the legal and technical foundations. A final decision on issuance is expected later in the decade.
What is clear is that CBDCs, including the digital euro, are no longer niche experiments. They are becoming a defining feature of the future monetary system. For Europe, the digital euro is less about innovation for its own sake and more about preserving monetary sovereignty, resilience and trust in an era where money itself is being reshaped.