ECB moves to next phase of Digital Euro project as preparation phase concludes

The European Central Bank (ECB) has confirmed it will advance to the next phase of the digital euro project following the successful completion of its two-year preparation phase, marking a significant step towards potentially issuing a central bank digital currency (CBDC) for the euro area.

The Governing Council’s decision, announced on Thursday (today), follows two years of technical groundwork, market consultations, and user research aimed at ensuring the digital euro would be secure, inclusive, and technically robust.

The digital euro is intended to complement physical cash and existing private-sector digital payment solutions, giving citizens across the euro area access to a public and universally accepted means of payment. It aims to reinforce Europe’s monetary sovereignty and strengthen competition in the payments market, where a large proportion of transactions are currently processed by non-European companies.

Timeline and next steps

If the regulation on the establishment of the digital euro is adopted by European co-legislators during 2026, a pilot phase and initial transactions could begin as early as mid-2027. The Eurosystem expects to be technically ready for a potential first issuance by 2029.

The ECB’s Governing Council emphasised that a final decision on whether to issue the digital euro will only be made once the legislative process is complete.

Christine Lagarde, President of the ECB, described the move as part of a broader effort to “make [the euro’s] most tangible form – euro cash – fit for the future, redesigning and modernising our banknotes and preparing for the issuance of digital cash.”

Piero Cipollone, the ECB Executive Board member leading the project, added that “a digital euro will ensure that people enjoy the benefits of cash also in the digital era. In doing so, it will enhance the resilience of Europe’s payment landscape, lower costs for merchants, and create a platform for private companies to innovate, scale up and compete.”

Key achievements of the preparation phase

The ECB’s Preparation Phase Closing Report outlines several key milestones achieved since November 2023:

• Draft rulebook: A comprehensive draft rulebook has been developed in collaboration with banks, payment service providers (PSPs), merchants, and consumer groups. It defines the operational and technical framework for digital euro payments, including user experience standards, dispute resolution mechanisms, and certification processes.
• Service provider selection: Five EU-based firms were chosen to provide components such as alias lookup, risk management, app development, offline payment functionality, and secure data exchange.
• Offline functionality: The ECB advanced its research into enabling transactions without internet access, ensuring payments could still take place during power or network outages.
• Accessibility and inclusion: Design efforts focused on ensuring the digital euro would be usable by all individuals, including those with limited digital skills or disabilities.
• Innovation platform: The ECB’s “pioneers and visionaries” initiative engaged 70 market participants – including banks, fintechs, and merchants – to test features like conditional payments and explore integration opportunities.
• Cost estimates: Development costs up to the first issuance are expected to total around €1.3 billion, with annual operating costs of approximately €320 million thereafter.

Insights from user research

The ECB also published a dedicated User Research Report conducted by Ipsos across all 20 euro area countries.

The study revealed cautious optimism among small merchants and vulnerable consumers about adopting the digital euro.

• Small merchants valued lower transaction fees, instant settlement, and offline functionality. Many viewed the ECB’s involvement as a guarantee of security and stability.
• Vulnerable consumers prioritised security, simplicity, and universal acceptance. Many expressed a preference for a payment solution distributed through trusted banks or public institutions.

Supporting Europe’s strategic autonomy

The ECB’s report emphasises that the digital euro will help Europe “future-proof” its monetary system by reducing dependence on non-European payment providers and ensuring that payments remain possible under all circumstances.

Currently, nearly two-thirds of card-based transactions in the euro area are processed by non-European companies, while 13 member states rely entirely on international payment networks for in-store transactions.

The ECB argues that a European public digital payment option would strengthen the continent’s strategic autonomy, encourage innovation, and give consumers and merchants greater choice in how they pay and receive money.

Outlook

In the coming phase, the Eurosystem will focus on:

1. Technical readiness – developing and testing the digital euro’s infrastructure.
2. Market engagement – conducting pilot projects with payment providers and merchants.
3. Legislative support – continuing to assist EU institutions in shaping the legal framework.

Work will proceed in modular stages to allow flexibility and limit financial commitments as the legislative process evolves.

While the project remains years away from potential issuance, the ECB’s latest publications mark a clear shift from conceptual design to practical preparation.

If successfully implemented, the digital euro would represent one of the most significant innovations in Europe’s monetary history – bridging the gap between traditional cash and the digital economy.