On January 28, 2026 (Pacific Time), Valdis Dombrovskis, the EU’s economic commissioner, said something that European policymakers usually imply rather than state: Europe needs a digital euro to cut its dependence on dominant U.S. payment companies. He pointed out that Visa and Mastercard handle nearly two-thirds of all EU card transactions, and argued that this level of reliance makes Europe vulnerable in a world where economics and technology are increasingly used as strategic leverage.
That framing matters. It turns the digital euro from a “modern payments upgrade” into something more political: an attempt to keep public money relevant in a private, foreign-owned payments stack.
The interesting question is not whether Europeans can build a digital euro. They can. The question is whether they can build one that people will actually use—without breaking the banking system, spooking voters on privacy, or creating yet another European payment scheme that works beautifully in Brussels slide decks and modestly in real life.
Cash is shrinking—and the gap is being filled by someone else
The digital euro debate starts with a simple trend: cash is still important, but it is used less often every year.
The ECB’s latest consumer payments study found that in 2024, cash was used at the point of sale in 52% of transactions (down from 59% in 2022). In value terms, cards accounted for 45% of in-store spending (cash 39%, mobile apps 7%). Online payments were rising too: 21% of day-to-day payments by number and 36% by value, up sharply from 2022.
In other words: Europe is becoming more digital—but not necessarily more European in who runs the rails.
This is the heart of Dombrovskis’ sovereignty argument. When cash declines, the “default” replacement is not automatically a European public alternative. It is usually some combination of card networks, global wallet layers, and payment gateways—many of them American. And once those systems become the norm, reversing dependence becomes hard, because payments are a network business: merchants accept what customers use, and customers use what merchants accept.
The new mood: payments as geopolitical infrastructure
The EU’s rhetoric has sharpened because the world around it has sharpened.
On the same day as Dombrovskis’ remarks, ECB Executive Board member Piero Cipollone warned that escalating tensions are strengthening the case for European payments autonomy, describing a world where economic and technological tools are increasingly “militarised.”
A payments rail sounds mundane until you treat it like infrastructure. Then the questions start to look familiar:
- What happens if a critical provider is pressured by its home government?
- What happens in a crisis, a cyber incident, or a major outage?
- What happens if pricing power sits outside your jurisdiction?
Europe is not arguing that Visa and Mastercard will wake up tomorrow and “switch off” Europe. It is arguing something subtler: strategic dependence is a risk even when systems are functioning normally, because leverage does not require sabotage. It can be exercised through standards, fees, compliance posture, or simply who gets to innovate fastest.
What the EU actually agreed (and why it’s a big step)
For years, the digital euro was trapped in the classic European holding pattern: lots of consultation, lots of stakeholder resistance, and not enough political urgency.
That changed in December 2025, when the Council of the EU agreed its negotiating position on the legal framework for a digital euro—and, tellingly, packaged it with steps to strengthen the legal tender role of cash.
This combination is revealing. Europe is trying to protect the idea of public money in two forms:
- cash, because physical resilience still matters
- a digital euro, because the economy is increasingly online
The Council position also clarifies what the digital euro is meant to be: a public facility backed by the ECB, usable “anytime and anywhere” in the euro area, designed to complement—not replace—cash.
Design choices: the “yes, but…” built into the architecture
The Council text and related reporting show Europe trying to solve three competing problems at once: adoption, privacy, and financial stability.
1) Preventing a bank run in slow motion
A digital euro that is too attractive could pull deposits out of banks. That sounds theoretical until you remember what money looks like in a crisis: people flee to the safest asset.
To manage that risk, Europe is building in holding limits. The Council position provides for limits on how much digital euro can be held in online accounts and wallets, with ceilings set by the ECB but subject to an overall cap reviewed at least every two years.
This is not a small detail. A holding cap quietly acknowledges the biggest fear bankers have: that a retail CBDC becomes a state-backed competitor to bank deposits.
2) Free basic services—so the “public option” feels public
If the digital euro is to be a baseline public utility, it cannot look like a premium fintech product.
The Council position states that payment service providers may not charge consumers for certain mandatory services, including opening and closing accounts, basic transactions, and moving money in and out of digital euro wallets from deposit accounts at the same provider. Value-added services may carry fees.
This is Europe trying to create a payments floor: basic, universal access—then let competition happen on top.
3) Online and offline: resilience with a privacy fight baked in
One of the most contested issues is whether the digital euro should work only offline (to maximize “cash-like” privacy) or also online (to be broadly useful).
Reuters reported that the Council backed a model with both online and offline functionality, diverging from earlier European Parliament preferences that leaned toward offline-only. Offline payments could be recorded locally and synchronized later, giving “cash-like” privacy while still functioning during connectivity disruptions.
This is the compromise Europe keeps returning to: offline for privacy and resilience; online for everyday relevance.
4) The quiet war over phones
A digital euro that cannot integrate smoothly into the devices people use is dead on arrival.
The Council position explicitly addresses access to mobile device hardware and software so that digital euro interfaces can work with fair access.
This matters because the modern payments experience is not just rails—it is the device layer. Whoever controls secure elements, NFC access, and wallet defaults influences which payment methods “feel” native.
5) Merchant fees: trying not to recreate the problem
If the political story is “Europe is paying too much rent to foreign rails,” it would be awkward to create a new public rail that becomes expensive for merchants.
The Council position describes a transitional period (at least five years) where interchange and merchant charges would be capped based on comparable payment fees, then later based on actual digital euro costs.
This is Europe trying to avoid a repeat of the “card tax” narrative—while still compensating payment providers.
If this is about sovereignty, why is Europe also strengthening cash?
Because sovereignty is also about choice under stress.
The Council’s cash proposal aims to safeguard acceptance and access, including effectively banning non-acceptance of cash by retailers with limited exceptions, and requiring member states to monitor cash acceptance and build “cash resilience” measures for major disruptions to electronic payments.
The subtext: if the digital euro is justified partly by resilience, then cash must be protected too, because it is still the most resilient payment method in a power outage.
The adoption problem: why would consumers switch?
The biggest risk to the digital euro is not technical failure. It is indifference.
Europe already has cards that work everywhere, wallets that feel effortless, and bank apps that are “good enough.” A new payment option has to answer the basic user question: what do I get that I don’t already have?
The ECB’s own consumer data hints at why the switch is not automatic: people say cards are faster and easier; cash is better for privacy and budgeting. A digital euro must persuade consumers it can combine the best of both—without the worst of either.
That is hard.
If you want a preview of how difficult new-rail adoption can be, look at open banking “Pay by Bank” in the UK: it grew, but remained tiny compared with the total payment universe for years. Habit inertia is real. (This is exactly where your existing UK open banking feature becomes a powerful internal link.)
The private-sector alternative Europe is already building: instant payments + Wero
Europe is not betting only on a central bank solution.
In the background, it has been industrializing account-to-account payments. The EU Instant Payments Regulation, adopted in March 2024, is designed to accelerate instant euro credit transfers across the EU.
And the banking industry has its own sovereignty project: Wero, the wallet from the European Payments Initiative. The roadmap described by the European Payments Council says Wero began with P2P, moves into e-commerce, and later targets point-of-sale and subscriptions. EPI has also talked about expanding merchant adoption and new country rollouts.
Here is the uncomfortable thought for digital euro designers: if Wero becomes “good enough,” the political appetite for a CBDC may weaken. Because the sovereignty goal—less dependence on foreign rails—could be met by a bank-led solution, at least partially.
So the digital euro has to justify itself not only against Visa and Mastercard, but also against Europe’s own private alternatives.
Fraud, trust, and the “public money” brand
Payments sovereignty is not just about geography. It is also about trust.
The ECB has warned that payment fraud is rising: Reuters reported that payment fraud in the European Economic Area rose to €4.2bn in 2024, up from €3.5bn in 2023, even as strong customer authentication remains effective.
A digital euro will not magically eliminate fraud—fraud often exploits humans, not rails. But Europe clearly wants a system where the baseline instrument is backed by public institutions with explicit consumer protections, not only by commercial incentives.
What happens next (and what to watch)
The Council has signalled momentum, but the remaining steps are the ones where details turn into politics.
- Negotiations with the European Parliament will test privacy, governance, and the scope of the online model.
- The ECB still has to decide whether to issue the digital euro once the legal framework is adopted.
- Reuters reporting suggests an ECB timeline of a pilot phase in 2027 and potential operational readiness by 2029.
But the real “tell” will be whether Europe treats the digital euro like a policy checkbox—or like a product that must win users.
That means answering the unglamorous questions:
- Will it be integrated into existing bank apps with near-zero friction?
- Will offline payments feel genuinely simple, not like a special mode?
- Will merchants see clear economics and operational ease?
- Will citizens believe privacy promises are enforceable, not just aspirational?
The bottom line
Europe is building the digital euro for a reason that is easier to say in Brussels than in a checkout line:
a modern economy shouldn’t have to rent its payments infrastructure.
But sovereignty is not a feature. It is a strategy—and strategies only work when they translate into daily behaviour.
If the digital euro becomes the payment method that works when others fail, costs little to accept, and feels safe enough to trust, it could become a quiet pillar of Europe’s autonomy.
If it becomes one more icon on a phone next to five others people already use, it will be remembered as a well-intentioned attempt to solve a geopolitical problem with a consumer product.
