The Digital Euro is the EU’s Next Big Thing — But at What Cost?

EducationMarch 27, 2025

In the last few months, the creation of a digital Euro has been heavily discussed. Representatives of the European Central Bank, President Christine Lagarde and Executive Board member Piero Cipollone, swear by it. Sure, the idea sounds great, but at what cost? In this article, we delve into what it can mean for European countries and citizens to have a government-backed digital currency.

A CBDC is a government-backed digital currency that uses blockchain. Unlike cryptos like BTC, SOL, ETH, or DOT, which are created by private companies or projects, the value of CBDCs is pegged to their fiat equivalent. This means that the value of the digital Euro would be the same as that of the fiat one. To learn more about CBDCs, check out this article we published a while ago.

Digital Euro: The Start of Something Great?

The idea of issuing a digital version of the Euro isn’t that far-fetched. It’s been done in other countries already — including China, the Bahamas, Nigeria, Russia, India, Australia — although some are still in the pilot stage. The Atlantic Council’s CBDC tracker offers interesting insights and stats into the matter.

This initiative is intended to provide a public digital currency that complements cash while enhancing the community’s digital economy. The idea is that the digital cash is accessible online and offline, via crypto wallets or physical bank cards. But how did it start?

In 2023, the European Commission proposed a legal framework for the digital euro, emphasizing privacy and security for users. According to European Central Bank (ECB) President Christine Lagarde, the final preparations for the digital Euro implementation should be ready by October this year, with plans to launch in 2027. For ECB’s executive board member Piero Cipollone, there are two great benefits: getting closer to the US’s productivity numbers, and easing the European citizens’ lives when it comes to everyday payments and transactions. In an editorial from last month, Cipollone believes that the advantages outweigh the risks. “(…) If we do not seize that opportunity, we run the risk of weakening our competitiveness, resilience, and strategic autonomy.”

The ECB hopes to finalize the legal groundwork by November 2025, potentially paving the way for a digital euro launch by 2027. In a recent statement, Lagarde pointed out that the bank will only be able to fulfill these deadlines if the Parliament and the Council complete the legislative process.

Do we really need a digital Euro?

Professor of Economics, Peter Bofinger, says no — at least if implemented according to plan. Lagarde argues that the CBDC’s main goal is to ease payment transactions and take physical money users to the digital side. However, according to Bofinger, there’s no need to do so, as most countries already have their own digital payment systems (MBWay in Portugal, Bizum in Spain, Pix in Brazil, and so on). “All in all, the digital-euro project is wrongly conceived. There is neither a need for central-bank deposits limited to a few thousand euros nor a need for a new payment system — based on a digital euro — merely to make cheap digital payments while offering no additional services.”

To sum it up, what Bofinger argues is that although there’s “a need to develop a competitive European payment system”, creating a digital currency might not be the way to go. Instead, he suggests the implementation of a PayPal-like system designed for the European Union and its citizens.

Kevin Dowd has an even more dire perspective on the success of CBDCs. The author of the article So far, Central Bank Digital Currencies presents three cases (Finland, Equador, and the Bahamas) where these currencies didn’t succeed, further speculating “that the root problem is that central banks are not good at retail-facing activities and can never successfully compete against private payment providers which are specialists in such activities.”

Privacy & Online Safety Potentially Undermined

Despite the promise of modernization, the digital euro raises concerns, namely regarding the citizens’ privacy and safety. Critics, like professor and corporate advisor Patrick Schueffel, warn that a centralized digital currency could give governments unprecedented surveillance powers over people’s financial transactions. In a CNN interview, besides sharing the same opinion as Bofinger, Schueffel said that the use of the CBDC Euro will only make tracking us easier for governmental institutions. “Not only will it be registered on an eternal digital ledger which purchases you made from cradle to deathbed, but any payment can also be censored on a keystroke.”

Thinking that governments aren’t able to track people’s movements in Web3 is a mistake, and Tornado Cash is a good example of that. Although they’ve been taken off the United States’ government black list, it’s clear that regulations are getting increasingly tighter, with Europe following the same steps. Laws like MiCA came into place to regulate the crypto ecosystem. Having said this, it’s only natural to assume that the usage of a digital Euro will be heavily regulated, thus, surveilled.

There is also the question of privacy. Privacy advocates argue that the introduction of a digital euro could lead to increased government oversight of individual financial behavior. With every transaction potentially traceable, there is concern that citizens’ financial privacy could be compromised. While the ECB has promised to implement robust privacy protections, critics worry that these measures may not go far enough to prevent misuse or unauthorized access to personal financial data.

Also, needless to say, everything that can be hacked will be hacked, so it’s probably not a question of if, but of when cybercriminals are able to penetrate the digital Euro system.

The move toward digital currencies in Europe carries significant economic, social, and political implications. While digital currencies promise to modernize payment systems and enhance financial inclusion, they also pose profound challenges to privacy and the traditional banking sector.

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