The digital euro will not replace cash and will be accompanied by a legal obligation for retailers to accept banknotes and coins, according to Burkhard Balz, the Bundesbank board member responsible for the project. In a wide-ranging interview, Balz framed the digital euro as a strategic response to Europe’s growing dependence on US payment firms, rather than a step towards a cashless society.
Balz, who sits on the board of the Deutsche Bundesbank, said the EU’s proposed Single Currency Package would strengthen cash’s status as legal tender at the same time as creating a legal basis for a digital euro. “The digital euro is not intended to replace cash,” he said, adding that current EU draft texts foresee an obligation to accept cash in the retail sector.
Reducing reliance on US payment firms
Balz argued that Europe’s payment infrastructure has become structurally dependent on non-European providers, particularly US card schemes and online platforms. In Germany alone, he noted, PayPal accounts for close to 30 percent of online payments, while Visa, Mastercard and American Express dominate the credit card market.
Only seven of the 21 euro area countries still have their own national payment systems, such as Germany’s girocard or France’s Carte Bancaire, according to Balz. The rest rely almost entirely on international providers. “We need to be able to pay independently of these providers,” he said, describing the issue as strategic rather than technical.
Balz acknowledged that US payment systems operate reliably today, but warned that geopolitical risks cannot be ignored. In extreme scenarios, access to foreign-controlled payment infrastructure could be restricted, he said, underlining the case for a European alternative.
Parliamentary debate and timeline pressure
The digital euro project is now heavily dependent on the legislative process in Brussels. Balz said the Eurosystem supports the approach taken by the European Commission and the Council of the European Union, but has concerns about parts of the European Parliament’s draft report.
More than 1,600 amendments have already been tabled in Parliament, reflecting deep divisions among political groups. One key point of contention is whether a European payment solution should first be built by private providers alone, or whether a public digital euro should be introduced from the outset alongside private services.
The European Parliament is expected to vote on the file in May. If negotiations proceed smoothly, Balz said a final agreement could be reached by the end of 2026. The Eurosystem aims to launch a pilot phase in mid-2027, with a potential go-live date around 2029.
Design choices, limits and privacy
Balz confirmed that the digital euro would not pay interest and would be designed as a “digital twin of cash,” intended purely as a means of payment. Holding limits are still undecided, although figures such as €3,000 have previously been discussed. Payments above the holding limit would be handled via a so-called waterfall mechanism, automatically drawing funds from a linked bank account.
Offline payments are also planned, allowing transactions to take place without an internet connection and offering cash-like privacy, with transaction data visible only to payer and payee.
Development costs for the Eurosystem are currently estimated at around €1.3 billion, with additional integration costs for banks. The infrastructure would be provided to banks free of charge, mirroring the current model for cash.
Balz acknowledged resistance from parts of the banking sector, but said concerns about business model disruption are overstated. Banks would remain the customer-facing interface and could earn fees and develop additional services on top of the basic digital euro offering.
For Balz, the pace of progress reflects the scale of the task. “Large-scale projects at the European level are marathon runs,” he said. “In my view, we’ve passed the 30-kilometre mark.”