Banks Warn Digital Euro Could Impede Private-Sector Payments

The European Central Bank’s digital euro effort is reportedly facing pushback from banks and lawmakers.

The central bank hopes to roll out the digital currency by 2029, with a hearing scheduled for Wednesday (Nov. 5) on the project. But as the Financial Times (FT) reported, a group of 14 banks issued a statement ahead of that hearing warning that a digital euro could subvert private-sector payment systems.

These banks last year launched Wero, a digital wallet designed to function as a rival to American companies like Mastercard, PayPal and Visa.

“The current design of the retail digital euro largely addresses the same use cases as private solutions, without offering any clear added value for consumers,” the banks said ahead of Wednesday’s hearing.

The FT added that Fernando Navarrete, a conservative minister from Spain tapped by the EU parliament to study the digital euro, has lobbied for a much smaller version of the project.

The European Central Bank (ECB) began studying the possibility of a central bank digital currency (CBDC) in 2020. Last week, its governing council said it hoped to launch the first digital euros in 2029, testing the coins during 2027.

Under the law, the ECB can only issue physical cash rather than digital tokens, meaning the project can only advance with the blessing of EU governments and its parliament, the FT said.

A sharp drop in the use of cash and the dominance of American payments providers creates the need for the digital euro to protect “our freedom, autonomy and security,” ECB executive board member Piero Cipollone said in September. 

The share of cash used in stores dropped from 72% to 52% in the five years to 2024, the report added. The digital euro has received a boost from the surge in dollar-backed stablecoins, which many in Europe feel could threaten the euro’s status.

Across the Atlantic, the U.S. Federal Reserve has studied the idea of a CBDC but has made no commitments to develop or pilot a retail version of the coin, PYMNTS reported in July.

“Fed Chair Jerome Powell has consistently said that such a move would need clear support from the executive branch as well as authorization from Congress,” the report said. “That position may be politically prudent, but it also reflects a gridlock… Still, the political momentum favors stablecoins, not central banks. A U.S. CBDC would represent a public alternative to the privately-issued stablecoin solutions promoted by the crypto industry.”

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