As geopolitical tensions rise and digital payments become strategic assets, the European Union is accelerating plans for a digital euro in a bid to reclaim control over its financial infrastructure and reduce dependence on US payment giants.
A Strategic Wake-Up Call for Europe
In a world where digital payments increasingly determine economic power, the European Union’s renewed push for a digital euro marks a decisive shift toward financial sovereignty.
On January 28, 2026, EU Economic Commissioner Valdis Dombrovskis called for faster development of the digital euro, warning that Europe’s heavy reliance on US-based payment networks leaves it strategically exposed. Visa and Mastercard alone process nearly two-thirds of all card transactions in the EU, giving foreign companies control over a critical layer of Europe’s financial system.
Speaking at the European Banking Summit, Dombrovskis framed the issue as a matter of resilience in an increasingly fractured global order.
“Europe cannot afford to outsource the backbone of its payments system,” Dombrovskis said.
His remarks come amid heightened geopolitical strain and renewed uncertainty over US economic policy, reinforcing concerns in Brussels that Europe remains vulnerable to decisions made outside the bloc.
The digital euro, a central bank digital currency designed for everyday retail use, is now being framed not merely as a technological upgrade, but as a strategic pillar of economic self-reliance.
From Policy Concept to Strategic Urgency
The idea of a digital euro has been under discussion for years. In 2020, the European Central Bank published its first report examining how a central bank digital currency could complement physical cash as digital payments surged across Europe.
Global developments soon sharpened the case. China launched pilot programmes for its digital yuan, cryptocurrencies gained momentum, and US dollar-backed stablecoins expanded rapidly, raising alarms about monetary sovereignty and private control over money.
In July 2021, the ECB launched a two-year investigation phase, followed by a preparation phase from November 2023 to October 2025 focused on technical design, rulebooks, and user testing. In October 2025, the ECB’s Governing Council approved deeper technical work, signalling readiness to move closer to implementation, pending legislative approval.
Unlike China’s state-driven digital yuan, the EU model emphasises privacy through pseudonymised data, financial inclusion via free basic access, and coexistence with commercial banks. The ECB would issue the digital euro, while banks and private payment providers would distribute it, preserving Europe’s two-tier banking system.
Geopolitical shocks, including sanctions and trade disputes, have transformed the digital euro from a cautious experiment into a strategic necessity.
Reducing Dependence in a Dollar-Dominated System
The implications of a digital euro extend beyond Europe’s borders.
Within the EU, it could streamline a fragmented payments landscape still shaped by national systems that complicate cross-border transactions. Globally, it represents an attempt to rebalance a financial order dominated by the US dollar, which accounts for roughly 60 percent of global reserves, compared with about 20 percent for the euro.
Supporters argue that a digital euro could gain traction in regions such as Africa and Latin America, where EU trade ties are strong. Africa alone absorbs around 10 percent of EU exports. Programmable payments linked to development aid, infrastructure funding, or green subsidies could further encourage adoption.
Some projections suggest the euro’s share of global reserves could rise to between 10 and 30 percent by 2030, strengthening Europe’s position in trade negotiations and climate diplomacy.
Yet these ambitions carry risks. Analysts warn of possible US pushback, including pressure on global financial infrastructure such as SWIFT, raising fears of a future currency conflict.
ECB board member Piero Cipollone reflected this concern in a January 28, 2026 interview.
“The growing militarisation of economic tools means Europe must fully control its payments,” Cipollone said.
The digital euro has become emblematic of a broader EU push for digital sovereignty, alongside parallel efforts in defence and technology.
Economic Benefits Versus Banking Fears
Supporters see clear economic advantages. A digital euro could reduce reliance on US payment firms, lower transaction costs, strengthen the negotiating power of European banks, and encourage innovation across a unified payments market. Faster and cheaper cross-border payments could also improve trade efficiency and boost overall economic growth.
However, the risks for the banking sector are substantial.
Studies suggest that even with a proposed holding cap of €3,000, up to €739 billion could migrate from bank deposits into digital euro wallets. This could raise funding costs by as much as 300 basis points and reduce net interest income by between 7 and 13 percent, potentially constraining lending, particularly for long-term green investments.
Implementation costs add another layer of concern. European banks may need to invest between €18 billion and €30 billion in system upgrades. For US payment firms such as Visa and Mastercard, a successful digital euro would likely mean lost market share across Europe.
Critics warn that without strict safeguards, the digital euro could introduce new financial vulnerabilities rather than reduce them.
Political Hurdles and Public Trust
From a technical standpoint, the project is viable. The ECB’s preparation phase has produced workable designs, and pilot programmes could begin by mid-2027 if EU legislation is approved in 2026. A broader rollout could follow by 2029.
The more significant obstacles are political and social. Banks remain wary of disintermediation, privacy advocates remain sceptical despite ECB assurances, and legislative approval is far from guaranteed in a divided European Parliament.
Public adoption is another uncertainty. Consumers may continue to rely on familiar private payment apps, limiting the digital euro’s real-world impact.
A Defining Choice for Europe
The digital euro is more than a new payment tool. It represents Europe’s bet on strategic autonomy in a world shaped by intensifying US-China rivalry and the growing weaponisation of economic tools.
As Dombrovskis has argued, the central question is whether Europe is prepared to retain technological control over its financial future.
With the clock ticking, the digital euro may prove to be one of the European Union’s most consequential economic experiments, shaping its place in the next era of global finance.