THE DIGITAL EURO: Unlocking its potential

Digital technologies are rapidly transforming our societies by changing the way we live, work, interact, communicate, and participate in the economy. One of the most significant shifts is in how we pay; as more and more people prefer using digital payment methods, such as credit or debit cards, over cash. The global decline in cash usage is already evident, with countries like China moving toward a fully cashless society, revealing a future where cash could become nearly obsolete. Although Europe remains more reliant on cash, accounting for 52% of transactions in 2024, this situation is expected to change, and when this happens, the European Union must be prepared. 

This policy brief examines the potential risks of a cashless European society and explores the Digital Euro as a solution to mitigate these challenges. At the same time, it identifies areas for improvement concerning this initiative to ensure that the benefits digitalisation brings to financial transactions are preserved, while safeguarding fundamental rights and inclusivity.

Introduction

The European economy currently consists of a dual monetary system, the so-called “public money” and “private money”. The first must be understood as the cash, including coins and banknotes, which are produced by National Central Banks (NCBs) with previous approval from the Governing Council of the European Central Bank (ECB) (ECB, 2025). While the second one, also referred to as “bank money”, must be understood as the amount of money that a person has in their bank account, including all transactions made via credit and debit cards or other online payment services (Münze Östereich, 2025).

Within this dual economy, cash, unlike private money, is the only form of money contributing to financial inclusion, as it is accessible to all and free of charge (CVRIA, 2020). Along the same lines, it is the only form of money which currently holds legal tender status, meaning that businesses and payees are obligated to accept euro cash at its full face value without additional charges (Commission Recommendation, 2010). 

Given this scenario, the complete disappearance of cash would risk excluding many vulnerable groups from the economy, including the unemployed, homeless, asylum seekers, and minors, among others. Furthermore, it would pose a serious threat to the stability of the European economy. Aiming to explore potential solutions, this article is structured into three sections, ensuring a comprehensive understanding of the topic. The first section of the paper delves into the vital role that cash plays in society and the economy, describing the negative consequences that the disappearance of cash would have for Europe. The second section analyses the position taken by the European Commission regarding this situation and delves deeper into the Digital Euro Regulation proposal. Finally, the policy brief concludes with a set of recommendations for the Parliament and the Council to amend the Digital Euro Regulation Proposal, ensuring it successfully addresses the needs of European society and its economy. 

THE CONSEQUENCES OF A CASHLESS SOCIETY

Social impact: Financial exclusion in a cashless society

Cash currently plays a central role in the promotion of financial inclusion, as, contrary to bank money, it is accessible to everyone and free of charge. This is not the case for private money, as its access typically requires a bank account, which may be conditional upon meeting specific requirements, such as age, income, employment status, or citizenship (Somogyvári, 2021).

Due to the multiple requirements imposed by banks, 13 million people in Europe currently do not have access to a bank account (Gortsos, 2016, p. 10). According to the European Union, this would mean that 13 million individuals are currently financially excluded, given the consensus equating financial exclusion and being unbanked.

While the number of financially excluded persons only represents 3.6% of the EU population, this number is expected to grow in the next decades. This is mainly because of the changing payment attitudes of euro area consumers, and the steady decline of consumers’ preference for cash; a reduction from 32% in 2016 to 22% in 2024, according to the 2024 ECB study on the payment attributes of consumers (SPACE) (ECB, 2024). While 62% of the euro area population believes that having the option to pay with cash remains very or fairly important, the growing preference among younger generations for online and mobile payments is already evident, with the use of smart devices for payments having doubled since 2022 (ECB, 2024). 

This growing tendency for cashless payments has already been acknowledged by multiple stakeholders. The German Bundesbank conducted a study where three potential scenarios were envisioned for cash payments in 2037. In two out of these three scenarios, the access and acceptance of cash could not be fully guaranteed. The most extreme scenario identified was the so-called “hyperdigital payment world”, where cash would disappear entirely and all payments would become fully digital. Banks would transition to exclusively online operations, and ATMs would vanish altogether, limiting access for those groups that do not meet the conditions for opening a bank account or are unable to adapt to digital finance, such as the unemployed, asylum seekers, and elders, among others (Deutsche Bundesbank, 2024). 

While the benefits of digital payments are multiple, such as enhancing user experience, lowering costs, and helping combat corruption and organised crime, a fully cashless society would also come with significant pitfalls. The World Economic Forum anticipates that with the disappearance of cash, those sectors of society without access to bank accounts or credit cards, as well as the individuals who struggle to use smartphones and computers or who lack mobile connectivity, would be left behind. This could result in millions of people, mainly retirees, newly arrived immigrants, individuals with disabilities, and those living in rural areas, being excluded from the economy and facing multiple risks, including isolation, exploitation, debt, and more (World Economic Forum, 2019). 

Overall, the figures indicate a clear shift toward a cashless society, with a hyper-digital payment world already being envisioned as a potential scenario for 2037 by stakeholders such as the German Bundesbank. While such a future brings the advantages of digital payment, it could also bring a negative social impact, specifically by excluding millions of people from full economic participation. This highlights the urgent need to develop inclusive solutions that preserve the benefits of digital payments while safeguarding fundamental human rights.

Economic impact: The obsolescence of the legal tender status

The section above has illustrated the potential negative social impact of a cashless society. However, such a transition could also carry significant economic consequences, potentially destabilising the euro area’s economy. 

To better understand these implications, it is important to be aware that cash currently represents the only form of money with legal tender status. In contrast, the acceptance of cards (with or without contactless technology) remains voluntary for companies (Commission Recommendation, 2010). 

The legal tender status was granted to cash because of its strong link to financial inclusion. As already acknowledged by the Commission, requiring companies to accept cash — currently the only form of public money — is simultaneously promising that citizens can continue to “go about their lives, with their fundamental rights protected” (Cash Essentials, 2020, para. 2). Legal tender status thus guarantees that all citizens, regardless of their access to payment services, can fully participate in the economy. 

However, in a potential future fully dominated by digital payments, the disappearance of cash would also entail the obsolescence of the legal tender as a whole. By envisioning such a potential scenario, multiple consequences can be anticipated. For example, with the legal tender status becoming obsolete, each company could decide which payment methods to accept (debit, credit, transactions, digital payments, etc.), which would inevitably lead to fragmented systems and frustrating consumer experiences (Segendorf & Wilbe, 2014). 

Simultaneously, other consequences would imply a disruption to the EU economy and the market as a whole. On the one hand, all those individuals facing financial exclusion who rely on cash would stop participating in the economy, which would lead to a decline in consumer spending. On the other hand, sectors such as small local businesses and informal markets, which are heavily dependent on person-to-person cash payments, would cease operating, thereby destabilising the job market and the broader EU economic landscape (Finance Watch, 2024). 

Overall, a transition toward a fully cashless society carries significant economic implications. The obsolescence of cash as legal tender would not only fragment payment systems and frustrate user experiences, but also risk excluding vulnerable groups from participating in the economy, reducing consumer spending, and destabilising market sectors that depend on cash transactions. This highlights the urgent need to ensure that moving towards a digital payment scenario does not come at the cost of European economic resilience. 

THE SOLUTION: THE DIGITAL EURO

Recognising the potential consequences of a fully cashless society, the ECB launched the digital euro project in 2020 as a preventive solution. With physical cash currently being the only form of public money available, the digital euro was envisioned as the digital alternative to public money, designed to ensure that, even in a future without cash, all citizens could continue to participate fully in the economy (ECB, 2020). 

By 2023, the digital euro initiative had already gained significant political momentum, with the finance ministers of euro area countries expressing their support through a Eurogroup statement (Council of the EU, 2023). This political consensus across the eurozone led the European Commission to publish the “digital currency package” in June 2023 establishing a regulatory framework for the digital euro, among other measures (Council of the EU, 2023). This policy brief will exclusively focus on the legislative proposal laying down rules for the digital euro. 

The proposal defines the digital euro as the “digital form of the single currency available to natural and legal persons” to be issued by both the ECB and national central banks (Article 2(1), EC digital euro proposal, 2023). A clear understanding of the digital euro begins with its core values: accessibility, acceptance, and privacy. 

Accessibility

As the digital euro is simply the digital form of public money, the ECB and national central banks — its issuers and those bearing full liability for it — have the responsibility to ensure that everyone can easily access it for free. This accessibility comes with users having their “digital euro wallets”, through which payments can be made for free via their respective banking apps, with which they are already familiar, or via a new dedicated digital euro app, which is expected to be developed by the ECB. The latest, envisioned as a user-friendly app, has been put in place to ensure that all those unbanked citizens have access to the digital form of public money, thus contributing to financial inclusion. Furthermore, once the European Digital Identity Wallets (“EUDI Wallets”) have been released, users will be able to make digital euro payments through them, as per Article 25 of the draft regulation. This initiative equally contributes to accessibility as the EUDI Wallets will be free of charge for natural persons (ECB, 2024). 

Acceptance

The widespread acceptance of the digital euro becomes essential to ensure it functions as a true means of payment, representing the digital equivalent of cash. To support this objective, the proposal grants the digital euro legal tender status. This means that, if adopted, businesses would be legally obligated to accept the digital euro as a payment method at its full value. To guarantee the full acceptance of the digital euro, provisions for sanctions and infringements on payment service providers are also laid down in Article 29 of the draft regulation (CEPS, 2023). However, as the objective of the draft regulation is to place the digital euro as a complement to cash and bank money, rather than replacing it, the text introduces limits for the use of the digital euro in stores. Which means that an individual holding digital euros will be able to make payments with them only up to a certain limit. Such a measure aims to safeguard financial stability, as well as the continued use and acceptance of bank money and cash, always complementing existing financial structures without undermining the role of banks. The specific limits are not specified in the proposal, as it will be the responsibility of the ECB to develop the instruments to impose such limits and to define the parameters (EC proposal digital euro, 2023). 

Furthermore, its acceptance also comes with ensuring that digital euro transactions can be made in both online and offline settings. When it comes to offline environments specifically, the digital euro, used for payments between two devices, should be able to be used in situations without internet connection or electricity, showcasing a strong commitment to its acceptance as equal to cash (EC proposal digital euro, 2023). 

Privacy

When conducting digital euro transactions, these will be designed to provide a high level of privacy. For online digital euro transactions, these are expected to follow the same data protection principles as private digital payment methods, compliant with EU regulations such as the General Data Protection Regulation (GDPR) and the Commission’s open data strategy. However, for offline digital euro transactions, the privacy conditions are even higher, as these would be the same as offline cash transactions, where only the payee and the payer know the transaction details, as per Article 23. These levels of privacy will be achieved by incorporating specific software and hardware components, such as the secure element and the digital euro applet, into the diverse digital euro apps (hereby “front-end services”) (EC digital euro proposal, 2023). 

Legislative status

Overall, the digital euro initiative was proposed by the ECB as a preventive solution to address the consequences of a potential cashless society and materialised through the European Commission’s draft proposal. However, the project is still in its early stages, with the European Parliament and the Council of the European Union each conducting their own review and assessment of the proposed text.

In the Parliament, the file was formally given to the Committee on Economic and Monetary Affairs (ECON), with Fernando Navarrete Rojas (EPP) as the appointed rapporteur who will be leading the negotiations and drafting the Parliament’s proposal. The file is currently under the category of “tabled”, which marks the official start of the legislative process in the Parliament, including tasks such as examining the proposal and draft amendments (Legislative train schedule, 2025).

In the Council, the file is currently in its early steps, with working party meetings having taken place during the summer months. The working party meetings of the Council are to be understood as technical-level meetings where experts from EU Member States gather to discuss the proposal and reach an agreement before it goes to higher levels of decision-making within the Council (Council of the European Union, 2025).

Once both the European Parliament and the Council have adopted their respective positions on the file, they will enter negotiations to reach a common agreement on a legislative text acceptable to both institutions. This agreement will then form the basis for formally starting the so-called trialogues, which are negotiation meetings between the European Parliament, the Council and the European Commission with the intention to reach a political agreement on a draft regulation (European Parliament, 2025). 

POLICY RECOMMENDATIONS 

The final section will offer specific recommendations to EU institutions to ensure that the digital euro meets its purpose: combating financial exclusion while making the EU fit for the digital age. While some recommendations will be general, others will be tailored to specific institutions, mainly the Parliament and the Council, which are currently reviewing the file and defining their respective positions.

These include:

EU institutions should strengthen and expand the scope of their communication strategy regarding the digital euro. Public scepticism is widespread, especially on social media platforms like TikTok, where the digital euro is often described as a tool for government control and mass surveillance. These discussions portray the ECB and NCB as institutions whose intention is to control people’s money and consumption patterns. Along the same lines, there is a common misconception that the digital euro will replace cash and threaten fundamental rights. Given this situation, certain actions urgently need to be undertaken, including:

• Expanding social media outreach by using a wider range of social platforms to effectively reach the general public, mainly younger generations.
  
• Reinforcing key messages in the public discourse, with a strong emphasis on the voluntary nature of the digital euro, its privacy protection features, and its supplementary role to cash or bank money.

Encouraging agreement on specific amendments to the digital euro draft regulation. Since the EU legislative process requires the Parliament and the Council to agree on a draft text and present the updated proposal to the European Commission, the following amendments should ideally be agreed upon concerning the draft proposal:

• Amendment to Article 33 introducing the adoption of an Implementing Act to define the governance framework to regulate access to specific secure components: Article 23 of the proposed Digital Euro regulation states that digital euro transactions must be possible in an offline environment, with privacy protections equivalent to those of cash. Achieving this level of security and privacy, mainly in offline transactions, requires the integration of specific software and hardware components, notably secure elements (SEs), and the offline digital euro applet, into the digital euro front-end services (digital euro apps). 

The problem is that secure elements and applets are owned and controlled by original equipment manufacturers (OEMs). Access to them requires individual contractual agreements with multiple OEMs (Google, Apple, etc.), with each OEM dictating its own access conditions. This situation results in the absence of a unified regulatory framework that mandates standardised access and ensures alignment with regulatory and security requirements.

To enhance consistency and ensure legal certainty, it is necessary to establish a European governance structure, primarily through an amendment to Article 33 that introduces the adoption of an Implementing Act to define the governance framework. This framework shall define standards and protocols for the provision and technical implementation of applets and secure elements, as well as mandate OEMs to grant access to their secure components to ensure interoperability. 

• Amendments to Article 38 regarding the Commission’s power to adopt delegated acts on sensitive matters, including data processing by the ECB and national central banks, and user privacy. The adoption of a delegated act requires the Commission to consult relevant experts and involves the European Parliament and the Council, both of which reserve the right to object to or revoke any delegated act. However, there is a need to amend Article 38  to further clarify and limit the Commission’s powers. These amendments should include:

Policy recommendation	Explanation	Background and context
Expansion of the objection period for delegated acts	Request an extension of the objection period for the European Parliament and Council to have sufficient time for assessing the delegated acts, especially regarding their technical complexity and sensitive nature.	The objection period is the timeframe during which the Parliament or Council can block a delegated act. It is for the Commission departments to decide the legal basis and the periods for objections. In the current proposal, the objection period is set at one month (para. 6).

• Clarifying free access to the digital euro: Article 17 of the draft regulation states that natural persons shall have free access to the “basic features” of the digital euro. These features, listed in Annexe II, include essential actions such as opening and holding an account, checking balances, depositing or withdrawing funds, and executing payments. However, the scope of these “basic features” is broadly defined, which creates legal uncertainty and leaves room for interpretation about charging fees for specific services. To ensure transparency and legal clarity, the draft regulation should be amended to include an additional Annexe that explicitly lists the “non-basic” features for which providers may charge fees. 

CONCLUSION

This policy brief has evidenced the added value the digital euro could bring to both European society and the economy. Initially proposed by the European Central Bank and advanced through the European Commission’s 2023 legislative proposal, the digital euro aims to contribute to financial inclusion while ensuring that the EU economy remains competitive in a rapidly evolving digital landscape.

Technology is transforming the way Europeans participate in the economy, and this has become evident through younger generations increasingly relying on contactless payments, online banking, and digital wallets. As this trend continues, the idea of a cashless society is no longer just a theory but is becoming a real possibility. If cash were to disappear, private bank money would become the sole means of available payment; a situation which would be problematic, given that not everyone can meet the conditions required to open a bank account. 

The brief continued by introducing the digital euro as a solution, offering a public digital alternative to cash, ensuring that everyone, regardless of their banking status, can fully participate in the economy. The analysis of the digital euro made it evident that EU institutions are not only responding to evolving consumer behaviour but are also proactively reinforcing financial inclusion, protecting the European economy, and contributing to the overall objective of making Europe fit for the digital age.

Although the digital euro initiative is still in its early stages, this represents a unique opportunity to refine the proposal and ensure that the digital euro reaches its full potential. Currently, only the European Commission’s draft legislative proposal has been published, and both the European Parliament and the Council of the EU are currently reviewing the file and developing their respective positions. 

This policy brief identified areas for improvement and suggested policy recommendations for the concerned EU institutions. These recommendations primarily focused on the need to strengthen their communication strategy. This takes into account the significant public scepticism surrounding the digital euro, particularly on social media, where it is often portrayed as a tool for government surveillance and control. Additionally, the brief provided specific recommendations for the Parliament and the Council to consider when proposing amendments to the Commission’s draft regulation. 

Overall, this policy brief aims to provide readers with a clearer understanding of the digital euro, while highlighting the fundamental role it plays in both society and the economy. At the same time, by deep diving into the solution and its technical implementation, it challenges the widespread narrative that often portrays the digital euro as a tool of government surveillance. An analysis which has demonstrated compliance with EU regulations as well as security and privacy standards, showcasing that the digital euro is moving in the right direction. Finally, the brief concludes by identifying key areas for improvement to ensure that the digital euro not only strengthens financial inclusion but also secures the EU’s position as a global economic leader.  The decisions made today will shape Europe’s future and determine whether the digital euro becomes a catalyst for trust, inclusiveness, and digital sovereignty.

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