The European Central Bank (ECB) is preparing to introduce the digital euro, which is intended to complement traditional currency and adapt the European financial system to the demands of the digital era. Experts emphasize that this new form of money could strengthen the euro’s position in the global market while increasing the flexibility and security of payments. The ECB sees this as an opportunity to enhance the competitiveness of the economy. However, concerns regarding the security and stability of the digital currency persist.
“The introduction of the digital euro into circulation would significantly strengthen the single currency, the unified European money. The euro would take a form that is highly attractive to both global investors and users within the European Union. This would have a positive impact on strengthening the international role of the currency,” said Professor Artur Nowak-Far from the Department of Integration and European Law at the Warsaw School of Economics in an interview with Newseria.
The euro is the most tangible element of European integration. It was introduced in 1999 as a settlement currency and entered circulation in the form of banknotes and coins on January 1, 2002. Today, it is the official currency of 20 EU countries that together form the eurozone. However, its influence extends far beyond the EU’s borders—the euro is currently the second most used currency in the world, accounting for 20% of global foreign exchange reserves, and many countries and territories worldwide have directly or indirectly linked their currency to it.
The digital euro is intended to be a digital form of central bank money, issued by the ECB, available, and accepted in all eurozone countries. It will not replace cash but will complement it, enabling secure, easy, and inexpensive digital payments across the eurozone to keep pace with changes in the digital age.
“The digital euro will not compete with physical euro; it is merely an enhancement of the options available to users,” said Professor Artur Nowak-Far.
One of its goals is to respond to changing payment preferences while also strengthening Europe’s autonomy and resilience.
“We should not underestimate geopolitical divisions; we should be equipped with a digital currency that helps defend our sovereignty,” stated ECB President Christine Lagarde during a debate in the European Parliament in early February.
Lagarde also stressed that the introduction of the digital euro is necessary for Europe to have a solid payment infrastructure and a tool that facilitates cross-border payments. Currently, there is no European digital payment solution available across the eurozone, and the ECB reports that in 13 out of 20 eurozone countries, card payments are processed through international payment card systems. The digital euro could facilitate cross-border transactions, eliminating some costs associated with currency conversion and financial intermediaries.
“The digital euro could become an investment asset, part of investment portfolios maintained by investors interested exclusively in digital currencies. This would also mean that the European Central Bank could issue the euro in digital form and generate revenue known as seigniorage, which is simply the income from the issuance of money and its circulation,” explains Professor Nowak-Far. “In short, it is the same situation that primary issuers of bitcoin have. However, in this case, the ECB must maintain a fixed parity between the ‘real’ euro and the digital euro at a constant 1:1 ratio. It cannot happen that one digital euro suddenly becomes worth 50 physical euros or vice versa. A crucial technical issue here is ensuring that this parity remains stable.”
The ECB has been preparing to issue its own digital currency since November 2023. A decision on the next phase of the project is expected by the end of 2025. However, as Christine Lagarde emphasized in the European Parliament, issues such as the impact of digital currency on financial stability and the privacy threshold still require public discussion.
The ECB sees the digital euro as an opportunity to modernize the financial system and improve the competitiveness of the European economy. The bank could also benefit financially from the introduction of the digital currency, with seigniorage revenues potentially being used to further stabilize the financial system in the eurozone. On the other hand, concerns remain, particularly regarding the stability of the digital euro and potential speculation that could lead to fluctuations in its value.
“The fundamental drawback of the digital euro is the risk associated with how the central bank would maintain a unified exchange rate of the euro against itself,” says Professor Artur Nowak-Far.
Not only the EU is working on a digital currency; different countries have varied approaches to this issue. In the U.S., for example, the approach to digital currency changed with the new administration, as former President Donald Trump explicitly opposed the concept of a central bank-issued digital dollar. Meanwhile, China has already introduced the digital yuan (e-CNY) to modernize its payment system, increase control over money flows, and reduce dependence on cash. However, there are concerns that China’s digital currency could be linked to the country’s social credit system. Similar concerns—about excessive government control over citizens’ finances and potential restrictions on economic freedom—also arise in discussions about the digital euro.
“The process of introducing the euro requires solving a number of serious technological problems. Apart from maintaining parity, ensuring transaction anonymity is a challenge, as transactions could theoretically be recorded anywhere and made available to public authorities. Overcoming this issue by guaranteeing transaction deletion and preventing them from being recorded in public registers is a major technological concern. I think that for the next two years, we will not yet see the digital euro,” concludes the expert from the Warsaw School of Economics.
