Digital euro: privacy concerns clash with payments plan

EU lawmakers have started talks on legislation for a retail digital euro and aim to reach an agreement within six months. The proposal would create a digital form of euro-denominated central bank money for everyday electronic payments. If the law is approved, the European Central Bank’s Governing Council would decide whether to issue the digital euro; the bank has targeted a possible launch decision in 2027 and does not expect public roll-out before 2029.

Under the proposal, consumers would access the digital euro through electronic wallets provided by banks and payment firms. The balance would be a liability of the ECB rather than a commercial bank deposit, and the system would be designed for in-store, online and wallet-to-wallet transfers.

Supporters say the digital euro would preserve central bank money as cash use falls and reduce reliance on foreign payment systems and dollar-denominated stablecoins. Piero Cipollone, a member of the ECB’s executive board, described the plan as a way to keep the benefits of cash in a digital economy. ECB officials have argued a European payment option is needed so the bloc does not depend solely on non-European infrastructure.

Consumer groups point to potential gains in payment access and security for people who face barriers with current services. Proposals include offline payment capability intended to provide some privacy comparable to banknotes.

Critics say a centrally issued retail currency could expand government and central bank control over spending and raise surveillance risks. Pius Sprenger called the slogan “The digital euro is here to protect Europeans” dangerous and warned it could justify controls over how people use money. Spanish commentator José Vizner warned authorities might limit how much digital currency individuals can hold and how they spend it.

Privacy advocates and technologists have flagged programmable features that could impose transaction restrictions. Observers cite cases where accounts were frozen in response to protests, such as actions by Canadian authorities in 2022, to show how financial controls have been used in crises.

Design elements intended to limit risks include caps on how much an individual may hold in a digital wallet, no interest on holdings and offline payment options. The ECB states it will not have access to personal transaction data and says the digital euro would complement, not replace, banknotes and coins. European data protection bodies have called for strong safeguards and high privacy standards to build public trust.

Cost estimates vary. The ECB projects upfront investment of about €1.3 billion and annual operating costs near €320 million. It expects banks and payment providers to face integration costs estimated between $4.6 billion and $6.9 billion. Banking-sector commentators have warned of possible deposit outflows and changes to lending; Lorenzo Bini Smaghi warned of a high risk of financial instability if deposit shifts occur. The ECB says its design choices aim to limit such risks.

Experience with retail central bank digital currencies abroad has been mixed. China’s digital yuan has processed large volumes while many consumers continue to use established mobile apps. The Bahamas’ Sand Dollar has seen slower-than-expected adoption. Nigeria’s eNaira struggled after launch, and Brazil closed its Drex platform in 2025 citing cost and privacy issues. The Bank for International Settlements has described retail CBDCs as complex to implement for central banks and market participants.

Negotiators in the European Parliament, member states and the European Commission have six months to agree a legal framework. If they agree, the ECB’s Governing Council will decide whether to proceed with issuance.