European Cash Fades—Digital Euro Rises to Reinvent Trust

The European Union is accelerating plans for a digital euro, emphasizing the need to maintain public control over monetary systems and counter the growing reliance on private and non-European payment platforms. The initiative is gaining urgency amid the decline of cash usage and the rapid rise of digital payment systems dominated by U.S. firms and other global technology players. The European Central Bank (ECB) has outlined a vision for a digital euro that mirrors the characteristics of physical cash—offering privacy, accessibility, and neutrality in digital transactions.

Cash transactions in the eurozone have declined significantly, dropping from 68% of payment volume in 2019 to 40% in 2024, while its share in transaction value fell from 40% to 24% during the same period. ECB Executive Board member Piero Cipollone has highlighted concerns that without a digital euro, the ECB risks losing relevance in everyday financial interactions. He emphasized that the digital euro is not intended to challenge the U.S. dollar globally but to preserve the euro’s role in domestic transactions and reinforce the ECB’s mandate to serve the public interest [1].

The digital euro would function as a form of central bank money, offering instant and free payments through a digital wallet. These transactions could occur both online and offline, ensuring usability in emergencies or in areas with poor connectivity. The system is designed to allow transfers from bank accounts or physical cash, with safeguards to prevent large-scale withdrawals from the banking system. Privacy is a key feature, with the ECB committing to not track users’ transaction data [1].

Analysts suggest that the digital euro could enhance financial resilience by reducing dependence on foreign platforms and reinforcing the euro’s liquidity. Goldman Sachs economist Filippo Taddei noted that nearly 30% of small and medium-sized enterprises in the eurozone prefer cash, with higher preferences in countries like Austria and Italy. Without a standardized digital alternative, the euro’s liquidity could suffer due to the fragmented nature of current payment systems. A digital euro could offer open standards for merchants and payment service providers, promoting competition and innovation [1].

Despite the strategic importance of the digital euro, the ECB has not set a definitive timeline for its launch. The project is currently in a preparatory phase, which will conclude in October 2025. Following this, the ECB Governing Council will decide on the next steps, subject to legislative approval. Once cleared, the development phase is expected to last two to three years, placing a realistic launch window between 2027 and 2029 [1].

The ECB has been clear that the digital euro is not a geopolitical tool but a domestic payment solution aimed at strengthening the euro’s role in daily life. While the euro’s share in global reserves increased to 20.06% in the first quarter of 2025, the U.S. dollar remains dominant, controlling 53% of allocated reserves. The dollar’s global influence is underpinned by a robust network of financial infrastructure, including a safe asset market of over $27 trillion in U.S. Treasuries, which the eurozone lacks [1].

The digital euro’s primary goals include preserving financial sovereignty, protecting user privacy, and ensuring the euro remains a viable and trusted currency in the digital age. As cash continues to lose ground, the ECB is seeking to future-proof the euro by offering a secure, accessible, and neutral digital alternative. This move aligns with broader European efforts to reduce reliance on non-European financial systems and reinforce the continent’s economic autonomy [1].

Source: [1] Cash is king: Why does the eurozone need a digital euro? (https://www.euronews.com/business/2025/08/20/cash-is-king-why-does-the-eurozone-need-a-digital-euro)