ECB Advances Digital Euro Project to Next Phase

Eurosystem Moves Toward Digital Euro Implementation

The European Central Bank has taken a significant step forward in its digital currency ambitions, with the Governing Council approving the transition to the next phase of the digital euro project. This decision follows the successful completion of the preparation phase that began in November 2023, marking a crucial milestone in Europe's journey toward a central bank digital currency (CBDC).

Timeline and Implementation Strategy

The Eurosystem has outlined a clear roadmap for the digital euro's development. If European legislators adopt the necessary regulation in 2026, the project could see pilot exercises and initial transactions beginning as early as mid-2027. The entire Eurosystem should then be ready for a potential first issuance of the digital euro during 2029.

ECB President Christine Lagarde emphasized the importance of this initiative, stating: 'The euro, our shared money, is a trusted sign of European unity. We are working to make its most tangible form – euro cash – fit for the future, redesigning and modernising our banknotes and preparing for the issuance of digital cash.'

Strategic Importance and Benefits

The digital euro represents a strategic response to evolving payment habits and the declining use of physical cash. According to ECB data, cash usage at physical points of sale has dropped significantly from 72% to 52% in volume between 2019 and 2024. The digital euro aims to complement physical cash by bringing its benefits – simplicity, privacy, reliability, and availability across the entire euro area – to digital payments.

ECB Executive Board member Piero Cipollone, who chairs the High-Level Task Force on a digital euro, highlighted the broader implications: 'This is not just a technical project but a collective effort to future-proof Europe's monetary system. A digital euro will ensure that people enjoy the benefits of cash also in the digital era. In doing so, it will enhance the resilience of Europe's payment landscape, lower costs for merchants, and create a platform for private companies to innovate, scale up and compete.'

Cost Structure and Financial Considerations

The Eurosystem has provided detailed cost estimates for the project. Total development costs, including both externally and internally developed components, are estimated at approximately €1.3 billion until the first issuance expected in 2029. External development costs alone are projected at around €265 million. Subsequent annual operating costs are forecast to be approximately €320 million per year from 2029 onward.

These costs will be borne by the Eurosystem, similar to how it currently covers the production and issuance of physical euro banknotes. The central bank expects these expenses to be compensated by generated seigniorage, even if digital euro holdings remain relatively small compared to physical banknotes in circulation.

Technical and Market Preparation

The next phase will focus on three main areas: technical readiness, market engagement, and legislative process support. Technical preparations include developing the digital euro's foundational systems and conducting pilot activities. Market engagement involves collaborating with payment providers, merchants, and consumers to finalize the rulebook and conduct user research.

Extensive user research conducted by the Eurosystem has revealed strong demand for a simple, reliable, and secure payment experience. According to findings published in a separate report, 66% of surveyed consumers expressed interest in trying the digital euro, with small merchants particularly supportive due to potential reductions in transaction fees.

Legislative Framework and European Support

The project aligns with European leaders' calls to accelerate progress on the digital euro, as recently emphasized at the October 2025 Euro Summit. The ECB is actively supporting the European Commission's proposal to reinforce the right to pay with cash while advancing the digital euro legislation.

The Governing Council's final decision on whether to issue a digital euro, and on what date, will only be taken once the legislation has been formally adopted by European co-legislators. The Eurosystem has committed to implementing its preparations flexibly, ensuring alignment with the legislative process while maintaining readiness for potential issuance.

As Europe moves closer to realizing its digital currency ambitions, the digital euro project represents a comprehensive effort to preserve monetary sovereignty, enhance payment resilience, and provide Europeans with a trusted public digital payment option in an increasingly digital economy.