Rebecca Christie / Mar 2026
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The best argument for the digital euro is to discourage ghosts of the euro crisis from returning to haunt Europe
Why does Europe need a digital euro? Supporters of the plan offer various rationales. These include independence from American payment providers, security in case those American providers cut off access, the convenience of digital cash, now that notes and coins are used less, and offline sales. But there is a bigger and better reason: monetary sovereignty and the credibility of the euro itself.
The European Central Bank needs to be the anchor for all euros, digital included. The European Union should not take the risk that a public void triggers the private sector to develop something that catches on and becomes widespread, then collapses and threatens financial stability. In other words, the EU cannot afford to not have a digital euro.
It all boils down to credibility. If there is a digital euro, it will be easier for the ECB to differentiate between its own integrity and market ventures, and thus to defend the currency while letting market discipline run its course.
The euro is still young. It is not rooted in a common fiscal policy, a full-fledged bank deposit insurance system or a permanent deep and liquid safe asset. Mostly, investors appreciate the euro area’s many accomplishments. But there have been times – the 2010-2015 crisis period, for example – when the currency’s inherent fragmentation has become a significant vulnerability. Rather than weighing whether, say, an Italian bond is as good as one from Cyprus, or what the spread between Estonia and Germany should be, investors just run.
The United States has more room for manoeuvre because the dollar is the world’s dominant currency and there is more integration at home. If a startup or an emerging-market country ruins itself using dollars, that company or country’s poor management gets the blame. Fingers are not pointed at the dollar or the Federal Reserve.
But if the same happens to a euro-using company or country, the repercussions could be felt by the euro itself. For example, a private-sector stablecoin becoming the market default and then stumbling could trigger renewed fear of a euro-area breakup. This could be because of imbalances in the sovereign bonds held as backing assets, alarming investors about diverging credit risk among euro countries. Or a more general run could be prompted by breaking a peg, in the same way that failing money-market funds have set off crises before. Other factors not yet on the radar could also arise.
The ECB will surely monitor these risks. But it will be better able to prevent and contain them if it already occupies all senior digital currency positions. This means a wholesale digital euro for cross-border payment and settlement and a retail version for everyday use – with the main reason for this distinction being process, not a difference in need. The ECB can do a wholesale version by itself, while retail money requires EU legislation alongside central bank planning.
Digital-euro supporters often argue that the EU should not depend on Visa and Mastercard and needs a homegrown alternative to assure payment sovereignty. This argument has not convinced the sceptics. Opponents say the private sector is capable of generating more options to meet demand, and they note that the EU already has a strong bank-transfer protocol and widely available instant payments.
Furthermore, in the unlikely event of Washington moving to cut off access to the card networks, many other things would likely have already gone wrong, including the fracturing of NATO and an end to decades of security cooperation. In that context, having to pay with cash or direct bank debit would be a manageable problem.
In progressing to the digital euro, the EU should therefore make monetary sovereignty the top priority. With sufficient investor confidence, the euro can maintain its status as a reliable store of value, unit of account and means of payment. This, in turn, will position the euro to increase its international role.
Even a weak dollar is still the global reference point, because financial plumbing is more important than comparative value when it comes to managing foreign reserves. To the extent that global central banks seek to protect themselves from US political risk, they buy gold or consult with the Fed, rather than making big moves into other currencies.
After the euro crisis, it took time and huge amounts of rescue money for the world to once again see the euro area as a thriving monetary union. The EU should build out its financial infrastructure to hold on to those gains. The retail and wholesale digital euro are vital to that process.
More by the author on this topic can be found at the Bruegel website.
