The digital euro is one of the most controversial financial projects in Europe.

Supporters see it as a way to preserve the bloc’s monetary sovereignty, reduce its dependence on foreign payment providers and ensure the survival of central bank money in an internet economy dominated by USD stablecoins.

But critics say a digital euro could be a way for a supranational organization to surveil – and in some circumstances even control – Europe’s population.

The official view is that: “A digital euro will reduce Europe’s over-dependence on suppliers outside Europe. It will give Europeans the ability to pay with their own money – with sovereign money issued by their central bank – in the digital economy,” he said Piero Cipollone, Member of the Management Board of the European Central Bank (ECB).

An alternative perspective is that a central bank digital currency (CBDC) could limit citizens’ freedom to spend as they see fit.

“Here are the 8 most dangerous words if you care about freedom: ‘The digital euro is to protect Europeans'” he said creates the managing director of Deutsche Bank, Pius Sprenger.

“This way they will be able to control EVERY euro you spend. Goodbye, money. The ECB will decide how much digital money you can have.” he said José Vizner, Spanish financial commentator.

So who is right? The Brussels bureaucrats in suits who seem to enjoy reading your private messages, or the neighboring cypherpunks in tinfoil hats who want to separate money from the state?

What is the digital euro?

The digital euro is: proposed a digital form of the euro that would be issued by the ECB, making it a digital form of central bank money, or CBDC.

The term “CBDC” raises the hairs on the back of privacy-loving cryptocurrency enthusiasts, evoking a 1984-style atmosphere of government overreach and surveillance.

President Donald Trump signed executive order banning CBDCs in the U.S. in January, citing threats to the financial system, individual privacy and the country’s sovereignty. The ban, which runs until 2030, was recently formalized in housing law legislation. Despite this, the ECB claims that they will cope in Europe.

Related: The CBDC ban in the US will go into effect without Trump signing the housing bill

He argues that a digital euro would provide eurozone residents with another way to make everyday transactions with central bank money as payments increasingly take place online; and that it will complement, not replace, physical banknotes and coins.

Not everyone is convinced of the benefits of the digital euro. Source: Pius Bankier

“The main reason for issuing a digital euro is to preserve the benefits of cash in the digital era” – Cipellone he said in an interview on July 14.

That’s nice, except that one of the main advantages of banknotes is that they can be tracked, traced and frozen at any time, Vizner noted. “They promise privacy… but it’s money that’s supposed to be trackable.”

Why does Europe want this?

The ECB, of course, makes no mention of the benefits of spying on everyday payments. Instead, officials argue that as the utilize of cash declines, there is a risk that Europe will become more reliant on private or foreign-operated payment systems such as Visa or Mastercard.

Some decision-makers expressed their opinion apprehension that the continent lacks control over critical payments infrastructure, according to ECB President Christine Lagarde saying in 2025:

“The whole infrastructure mechanism that enables payments, credits and debits is not a European solution… We need to make sure there is a European offer, just in case.”

Consumer groups such as the European Consumer Organization (BEUC) have also highlighted the potential benefits for users.

Deputy chief communications officer Andrew Canning told Cointelegraph that a digital euro could provide consumers with a “safe and inclusive” payment option that would complement existing solutions, particularly for people who face barriers to accessing digital payments.

Related: South Korea plans to launch second CBDC pilot phase in September: report

But critics say a digital euro would give governments and central banks control over how citizens spend their money.

These concerns are not theoretical, even in Western democracies. Authorities during the 2022 Freedom Convoy protests in Canada ordered banks, crowdfunding platforms and other financial institutions to freeze accounts associated with the blocks.

Why do we need a digital euro? Source: ECB

Efrat Fenigson, technology entrepreneur and privacy advocate, he said that the digital euro could become “an infrastructure for programmable money, programmable identity and programmable behavior”, warning that “freedom does not disappear overnight. It disappears one permission at a time.”

Patrick Schueffel, professor of banking and finance at the Freiburg School of Management, also warned that CBDCs could significantly raise governments’ ability to monitor financial activity.

Are there safeguards?

EU privacy watchdogs have said the project requires sturdy safeguards from both the Data Protection Supervisor (EDPS) and the European Data Protection Board (EDPB). saying For the digital euro to gain public trust, a high level of privacy and data protection is indispensable.

ECB euro privacy materials in digital format provide skeptical that offline payments will emerge with cash-level privacy, and insist that the bank should not have access to personal transaction data.

Canning told Cointelegraph that BEUC is “currently satisfied” with the proposal and that “we trust that consumer protections will be protected in the final negotiations between EU lawmakers.”

However, the ECB’s arguments may not be enough to convince doubters.

How does the digital euro work?

Unlike privately issued stablecoins such as Tether or USDC, which are denominated in US dollars, a digital euro would be denominated in euros and issued by a central bank. Consumers would still be able to access it through their regular bank or payment service provider.

Unlike physical cash, which people keep directly in their wallets, a digital euro would be it available via electronic wallets and is used to make payments in stores, online or between wallets.

The base money would remain a liability of the ECB rather than the commercial bank, which supporters say would give it the same public support as cash rather than constitute a claim on the commercial bank’s deposits.

Related: Bank of England governor denies Farage lobbying influenced CBDC policy: report

Unusual bedfellows: cryptocurrencies and banks

Cryptocurrency and privacy advocates have an unusual ally in the fight against the digital euro, because part of the banking sector is also not very interested in it.

They fear the central bank’s switch to a digital euro will reduce bank deposits, forcing them to rethink lending to businesses and consumers.

Lorenzo Bini Smaghi, an Italian economist and banker who sat on the ECB’s executive board from 2005 to 2011, said: “There is a high risk of financial instability, which could have serious consequences for the real economy.”

ECB argues that design choices were made to “minimize any potential risks” to the banking industry. Users would be circumscribed to keeping a tiny amount of digital euros in their wallets at any time to “prevent excessive outflows of bank deposits” and “as with cash in the wallet, no interest would be paid on digital euro holdings.”

Estimated outflows of bank deposits according to existing limits. Source: ECB

How much will it cost?

The cost of implementing a digital euro has become a bone of contention among critics, with the ECB estimating it will amount to investments of around 1.3 billion euros (about $1.5 billion), with ongoing operating costs of around 320 million euros ($370 million) a year.

Commercial banks and other payment service providers face high costs of integrating the digital euro into their services. ECB expects implementation costs for the banking sector ranging from $4.6 billion to $6.9 billion.

When will it come?

After years of discussions, lawmakers in the European Parliament, EU member states and the European Commission have started negotiations on the final digital euro legislation and aim to reach an agreement within the next six months.

Onion he said in an interview from July 13:

“We hope that the text will be finalized by the end of the year, when we will be able to decide on the future issuance of the digital euro.”

The path to the digital euro. Source: Cointelegraph

If these rules are adopted, the next move will be up to the ECB’s Governing Council, which will decide whether to introduce a digital euro sometime in 2027. Europeans are unlikely to see it in their daily lives before 2029, if it is approved at all.

Has this been tried before?

More than 100 countries began exploring CBDCs several years ago, and most have abandoned the idea or moved to a wholesale model instead of a retail currency. The few CBDCs produced have not been widely adopted.

China he started piloting the introduction of the digital yuan, or e-CNY, in 2019, followed by a nationwide rollout. Even though it has processed trillions of yuan in transactions, most Chinese consumers still prefer to utilize familiar payment apps such as Alipay and WeChat Pay.

Bahamas Sand Dollar Project. Source: IMF

The Bahamas has become the first country to launch a nationwide retail CBDC fired sand dollar in 2020. While the project aimed to improve financial inclusion, its adoption has been slower than many expected, prompting authorities to push for wider distribution through commercial banks.

Elsewhere, Nigerian eNaira too he fought gain traction when launched in 2021 despite sturdy support from the Brazilian government and central bank close its Drex CBDC platform in 2025, citing cost and privacy concerns.

As the Bank for International Settlements he stated in 2023, “retail CBDC is a complex endeavor, and not just for central banks.”

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