ECB’s Cipollone Defends Digital Euro Amid Rising Geopolitical Tensions and Payment Fragmentation

TLDR:

• Cash usage in eurozone transactions plummeted from 40% in 2019 to just 24% in 2024 as digital payments surge 
• Digital euro will serve as legal tender requiring all merchants accepting digital payments to adopt the system 
• E-commerce now represents over one-third of transaction value, creating urgent need for digital payment solutions 
• ECB official rejects offline-only digital euro proposal, questioning its viability for addressing e-commerce requirements
  

European Central Bank Executive Board member Piero Cipollone has reinforced the institution’s commitment to developing a digital euro, framing the initiative as essential infrastructure rather than a defensive measure.

Speaking in a recent interview, Cipollone emphasized that the project addresses fundamental gaps in Europe’s payment ecosystem while reducing reliance on non-European providers amid growing geopolitical tensions.

Bridging the Digital Payment Gap in European Commerce

The ECB official outlined how technological advancement has transformed payment behaviors across the eurozone. Cash usage has declined sharply from 40% of daily transactions in 2019 to just 24% in 2024.

This shift reflects changing consumer preferences, particularly as e-commerce now represents over one-third of transaction value. Traditional banknotes and coins cannot serve digital commerce needs, creating a void the central bank aims to fill.

Cipollone explained that the ECB’s mandate requires providing payment methods and ensuring system functionality.

“We might ask ourselves whether these two requirements are met, or whether the payments system is so fragmented that we don’t have a digital way to pay seamlessly across Europe without relying on non-European providers,” he stated.

The digital euro would establish a unified standard accepted across all member states. Merchants accepting digital payments would be required to accept this legal tender, eliminating fragmentation caused by multiple private sector standards.

The proposal represents an evolution of central bank responsibilities rather than innovation. Cipollone noted that “ten years ago it was less problematic” when cash dominated transactions.

However, the rapid decline in central bank money usage for retail purchases has forced adaptation. Describing the initiative, he said the digital euro is “public money in digital form,” preserving the accessibility citizens once enjoyed with physical currency.

Private sector involvement remains crucial to the ECB’s vision. The institution has long encouraged commercial entities to develop pan-European solutions.

Cipollone noted that a public digital euro standard would actually facilitate private sector development by providing common infrastructure.

Payment service providers could build upon this foundation rather than creating competing proprietary systems.

Geopolitical Considerations and Parliamentary Concerns

While Cipollone resisted characterizing the digital euro as purely defensive, he acknowledged heightened geopolitical risks. “All these potential geopolitical tensions and the weaponisation of every conceivable tool clearly increase the level of risk,” he observed.

A European-controlled infrastructure built on domestic technology would reduce excessive dependencies. Citizens would then choose their preferred balance between public and private payment solutions.

Some European Parliament members and industry voices have suggested waiting for banking sector alternatives. The parliamentary rapporteur proposed focusing on payment system development through commercial channels.

Cipollone welcomed private sector integration efforts but maintained that public provision remains an ECB responsibility. The digital euro would enhance systemic resilience regardless of parallel commercial developments.

One suggestion involves limiting the digital euro to offline functionality only. Cipollone questioned this approach given the project’s e-commerce objectives. “How can an offline solution be used to pay in the e-commerce space? I don’t know,” he remarked.

The central bank seeks viable European options for digital commerce transactions currently dominated by foreign platforms.

Regarding monetary policy independence, Cipollone dismissed concerns about external political pressures. The ECB focuses exclusively on eurozone economic conditions and price stability targets.

Describing current conditions, he said “we are in a good place” with recent GDP resilience and inflation near the 2% target.

Investment growth particularly encourages optimism as it supports both demand and productive capacity expansion without threatening price stability.

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