ECB Eyes Digital Euro to Rival American and Chinese Payment Systems

The European Central Bank (ECB) is taking significant steps to introduce digital euro, aiming to reduce Europe’s dependence on dominant American and Chinese payment systems. Piero Cipollone, a member of the ECB’s executive board, shared insights into this initiative during an interview with Le Monde. He emphasized the importance of Europe closing the gap with the United States, especially in technology and productivity.

Addressing Europe’s Technological Lag

Cipollone highlighted a critical issue: while employment levels in the euro area have improved, productivity growth remains a challenge. European firms, often smaller and less equipped with modern technology compared to their American counterparts, struggle to compete globally. “The lack of scale and fragmentation across national lines has affected the financing and development of European firms, preventing them from effectively competing on the international stage,” Cipollone noted. He illustrated this by referencing the European Football Championship, where ticket purchases were largely processed through American and Chinese payment systems like Mastercard and Alipay, exposing Europe’s reliance on foreign financial infrastructures.

To counter this dependency, the ECB is actively working on the digital euro, which Cipollone describes as “an electronic form of cash for digital payments.” This initiative is currently in a two-year preparation phase, laying the groundwork and establishing rules for the potential digital currency. A final decision on its implementation is expected by late 2025, though no specific launch date has been disclosed.

Despite the momentum behind the digital euro, public opinion across Europe remains divided. In Germany, for example, nearly 90% of households are open to adopting a central bank digital currency, but concerns about privacy are prevalent. About 8% of respondents fear the digital euro could lead to increased surveillance of their payments. Deutsche Bundesbank president Joachim Nagel acknowledged the need for more public education to address these concerns and ensure a broader understanding of the digital euro’s benefits.