The European Central Bank (ECB) argues that the digital euro is not a threat to banks but a strategic lifeline against big tech payment firms and stablecoins.
Executive Board member Piero Cipollone and Supervisory Board Vice-Chair Frank Elderson published a joint blog post laying out the case. They framed the digital euro as a competitive tool that European banks urgently need.
European Banks Are Losing Ground
The two ECB officials painted a stark picture of European banking’s dependence on foreign payment infrastructure.
According to the blog post, non-European card schemes currently process two-thirds of all euro area card transactions.
That reliance runs even deeper in some countries. Thirteen out of 21 euro area nations depend entirely on international card schemes or mobile solutions for in-store payments. More than half have no domestic solution for e-commerce payments with wide acceptance.
Meanwhile, a separate ECB working paper published earlier in March warned that stablecoin growth could drain retail deposits from European banks altogether.
The ECB found that greater stablecoin interest is already linked to measurable declines in retail deposits, alongside reduced bank lending to businesses.
Cipollone and Elderson argued that banks currently face a triple loss:
- With international card schemes, they lose fees.
- With big tech mobile payment solutions, they lose fees and data.
- With stablecoins, they risk losing fees, data, and stable retail deposits.
Chart showing the digital euro compensation model versus a four-party card scheme
How the Digital Euro Would Help Banks Compete
The ECB designed the digital euro to place banks at the center of its distribution model. Banks would manage digital euro accounts and retain customer relationships and creditworthiness data.
On the revenue side, the Eurosystem plans to eliminate scheme and processing fees entirely. Banks would receive compensation for services through a model the European Commission included in its proposed digital euro regulation.
The blog also highlighted co-badging as a key advantage. European debit cards could pair with the digital euro for pan-European acceptance, removing the need to rely on foreign card networks for cross-border use.
The ECB estimated total bank investment costs at between €4 billion and €5.8 billion, or roughly €1 billion to €1.44 billion per year over four years.
That figure represents about one-fifth of the costs projected by some external studies and approximately 3.4% of significant banks’ annual IT upgrade budgets.
Pilot Planned for 2027
The Eurosystem plans to launch a pilot exercise in 2027 to test digital euro infrastructure in real-world conditions.
If EU lawmakers adopt the regulation during 2026, initial transactions could begin as early as mid-2027, with the full system potentially ready for first issuance during 2029.
The ECB said participating banks would help shape implementation choices, including integration approaches and cost management strategies.
The blog post also addressed financial stability concerns. The ECB’s own analysis, based on bank data, found that the digital euro would not harm financial stability.
Holding limits for individuals, a ban on corporate holdings, and the absence of interest on digital euro balances would prevent destabilizing deposit outflows.
Whether European banks embrace the digital euro as an opportunity or resist it as a burden may depend on how quickly the EU Parliament finalizes the regulation that the ECB needs to move forward.
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