A new academic paper has delivered one of the most comprehensive critiques yet of the European Central Bank’s digital euro project, questioning whether the ECB’s own public explanations accurately reflect the risks and trade-offs of its proposed design. The study directly challenges official claims on privacy, security, and societal benefits at a moment when legislative negotiations are entering a decisive phase.
The paper, titled Digital Euro: Frequently Asked Questions Revisited, examines the ECB’s official digital euro FAQ and supporting technical documents line by line. Written by researchers from universities in Germany, the Netherlands, and Switzerland, it argues that the ECB’s answers systematically understate privacy risks, overestimate the feasibility of offline payments, and fail to articulate a clear public benefit beyond existing payment systems.
Central monitoring and privacy concerns
One of the paper’s strongest conclusions is that the online version of the digital euro could offer less privacy than today’s digital payments. While the ECB emphasises pseudonymisation, the authors argue that a centralised database of all online digital euro transactions would still allow detailed behavioural profiling once any transaction is linked to an individual.
Unlike today’s fragmented payments landscape, where data is spread across thousands of institutions, a single ECB-managed ledger would concentrate sensitive information in one place. The authors warn that this would create a powerful surveillance capability and a high-value target for cyberattacks, raising questions about proportionality under European fundamental rights law.
Offline payments under technical strain
The paper is particularly sceptical about the ECB’s vision of an offline digital euro that offers cash-like anonymity. The authors argue that the design relies on consumer devices being protected by “secure hardware” that must resist attacks by their own owners, indefinitely and at scale.
Drawing on decades of documented hardware security breaches, they conclude that this assumption is unrealistic. If such hardware were compromised, unlimited double-spending could occur until devices reconnect to the network, undermining both security and trust. The ECB’s proposal to detect fraud only at a later defunding stage, the paper argues, contradicts claims of safe and instant offline payments.
Liability and incentives left unclear
Beyond technology, the authors highlight unresolved legal and economic questions. They note that ECB documents remain vague on who would bear losses in cases of offline fraud, whether payment service providers, merchants, consumers, or the Eurosystem itself.
The paper also questions the incentive structure for banks and other payment service providers. Consumers are promised free use, while intermediaries are expected to absorb onboarding, compliance, and operational costs, funded mainly through capped merchant fees. According to the authors, this risks market concentration and could disadvantage smaller providers, while merchants face mandatory acceptance and potentially high integration costs.
An unclear value proposition
Perhaps most damaging is the paper’s assessment of the digital euro’s overall utility. Once legal tender status and mandatory acceptance are set aside, the authors argue that the proposed system offers few tangible advantages over existing cards, wallets, or instant payment schemes. Bank deposits are already insured well beyond the expected digital euro holding limit, and many current digital payments are free for consumers.
The paper concludes that without a clear and unique benefit, such as genuinely privacy-preserving online payments, the digital euro risks becoming an expensive and complex addition to Europe’s payments landscape rather than a meaningful upgrade.
A challenge for policymakers
The authors stop short of rejecting digital public money outright. Instead, they call for a fundamental rethink of priorities, including abandoning the offline design, focusing on privacy-enhancing online payments, making merchant acceptance voluntary, and embracing open and auditable software.
As the ECB and EU legislators continue negotiations on the digital euro regulation, the paper adds technical weight to concerns already voiced by privacy advocates, merchants, and some policymakers. It raises a central question that Europe’s institutions may now find harder to avoid: what problem, exactly, is the digital euro meant to solve, and at what cost?
Related: ECB Outlines Core Design Features for the Digital Euro in New Technical Annex