The European Central Bank (ECB) is actively advancing the preparatory phase of its proposed digital euro, slated for completion by October 2025.
Digital euro is now a greater imperative than ever
However, recent developments have intensified scrutiny from policymakers and financial experts regarding the feasibility of such an initiative.
The prolonged operational failure of the ECB’s Target 2 (T2) system, which underpins critical financial transactions within the Eurozone, has exacerbated doubts about the institution’s technical and operational resilience, raising questions about its capacity to govern a central bank digital currency (CBDC) effectively.
The T2 system, which processes high-value payments integral to European banking liquidity – €3 trillion ($3.12 trillion) of daily payments and financial trades – experienced a severe outage last month, rendering interbank settlements inoperable for an entire business day.
This event has heightened apprehension among stakeholders regarding systemic vulnerabilities within the ECB’s technological infrastructure.
While ECB officials assert that the digital euro would function via the separate TIPS (TARGET Instant Payment Settlement) system – purportedly designed to ensure uninterrupted transaction capabilities – critics argue that the fundamental reliability of ECB-operated financial networks remains uncertain.
An ECB spokesperson sought to mitigate concerns by affirming that “the digital euro’s architecture is being designed with robust safeguards to maintain operational continuity, even in the face of unforeseen disruptions.”
However, European legislators remain sceptical, with many emphasising that the ECB must first demonstrate its ability to maintain stable and resilient financial infrastructure before embarking on a large-scale digital currency initiative.
Political and Legislative Resistance
Opposition to the ECB’s digital currency initiative is mounting among European policymakers, particularly in light of the recent system outage.
Markus Ferber, a leading figure in the European People’s Party – the largest political faction in the European Parliament – questioned the ECB’s governance efficacy, stating, “This incident significantly undermines the ECB’s credibility.
If the institution struggles to ensure the functionality of its existing financial architecture, it raises serious concerns about its capability to oversee a digital euro.”
Green Party lawmaker Rasmus Andresen similarly underscored the importance of public trust, asserting that widespread confidence in the ECB is a prerequisite for the digital euro’s legitimacy.
Without demonstrable institutional reliability, Andresen warns that the digital euro initiative may face “substantial risks of failure.”
Meanwhile, Johan Van Overtveldt, representing the European Conservatives and Reformists Group, reiterated the necessity of establishing an uninterrupted and cyber-resilient financial infrastructure before transitioning towards a CBDC model.
Trajectory for the Digital Euro
Despite political resistance and technical apprehensions, the ECB remains resolute in its commitment to the digital euro’s development.
ECB President Christine Lagarde has reiterated the strategic imperative of a Eurozone CBDC, arguing that “for both proponents and sceptics alike, the relevance and necessity of the digital euro have become increasingly evident, particularly in light of the evolving financial landscape at both the wholesale and retail levels.”
The preparatory phase, initiated in November 2023, encompasses technological evaluations, stakeholder consultations, and the formulation of a regulatory framework.
A conclusive determination on the digital euro’s implementation will ultimately rest with the EU’s Governing Council, contingent upon the enactment of requisite legislative measures.
Future Implications
Should the digital euro materialise, the Eurozone would align with jurisdictions such as the Bahamas, Jamaica and Nigeria, which have already operationalised CBDCs.
By contrast, the US has exhibited reluctance towards the adoption of a state-backed digital currency, instead prioritising regulatory frameworks for stablecoins.
The ECB frames its digital euro initiative as a strategic response to the accelerating shift towards digital payments and the increasing prominence of stablecoins.
Nevertheless, unless the ECB can assuage prevailing doubts regarding its infrastructural reliability and operational governance, the initiative risks encountering significant resistance.
As the October 2025 milestone nears, the ECB faces a critical juncture, necessitating demonstrable advancements in both technological robustness and institutional trust to secure the digital euro’s viability within the evolving financial ecosystem.
The post The digital euro is now a greater imperative than ever appeared first on Payments Cards & Mobile.