ECB lines up digital euro partners, 2027 pilot slated

During an executive committee meeting of the Italian Banking Association last week, European Central Bank (ECB) Executive Board Member Piero Cipollone outlined the ECB’s plans for piloting the digital euro, including selecting payment service providers in early 2026, a 12-month test scheduled for the second half of 2027, and how banks will be compensated for their role in distribution.

“We aim to be ready for a potential first issuance of the digital euro during 2029,” said Cipollone. Adding that “a pilot exercise and initial transactions could be launched in mid-2027.”

However, he qualified this optimism by noting that “this is based on a working assumption that the EU co-legislators will adopt the Regulation on the establishment of the digital euro in the course of 2026.”

On this, Cipollone briefly outlined the current status of the legislative process, the slow movement of which has thus far proved a frustration to the ECB. He pinpointed May as the target date for the European Union parliament to adopt a point on the digital euro, with the adoption of digital euro regulation to occur by the end of the year.

From parliament making a decision to the digital euro actually being issued, Cipollone predicted a two-year timeline.

Digital euro pilot

In terms of the planned pilot, Cipollone said it would be a 12-month pilot, starting in the second half of 2027, conducted in a “controlled Eurosystem environment involving real-world transactions.”

A limited number of payment service providers (PSPs), merchants and Eurosystem staff will participate in the pilot, with PSP selection scheduled to start in the first quarter of 2026. According to Cipollone, the objectives of the pilot are to test readiness before scaling up, improve the digital euro value proposition, improve the go-to-market strategy, and prepare for the subsequent market roll-out.

Compensation

As part of his pitch to the Italian Banking Association, the trade association of Italian banks, and as such a key body the ECB wants to get on board with the digital euro project, Cipollone spent some time outlining how banks will be fairly compensated for their role in distribution, “in recognition of their efforts.”

According to the ECB executive, a proposed cap on merchant service charges—the maximum fee that PSPs can charge merchants for accepting the digital euro—would be counterbalanced by the wide adoption of the digital euro, which in turn would promote innovation and provide competition for private card schemes, such as Visa (NASDAQ: V) and Mastercard (NASDAQ: MA).

On this latter point, Cipollone also explained that it will be possible to integrate the digital euro into existing digital and physical payment solutions, eliminating the need to pay international card scheme fees for euro area cross-border transactions. Thus, “fostering independence from such schemes,” he said.

Furthermore, in a possible allusion to euro stablecoins, Cipollone noted that the digital euro, when launched, will coexist with and complement private solutions.

“Private solutions can leverage standardised euro area acceptance network to roll out at scale without having to invest heavily in their own network,” said Cipollone.

Of course, all of this depends on the EU parliament passing the necessary legislation. A snail-like process that finally saw some notable progress last September, when EU finance ministers reportedly agreed on a framework for customer holding limits.

This was cause enough for Cipollone, at the time, to comment that “the discussion at the level of member-states is going very well,” whilst predicting that “the middle of 2029 could be a fair assessment.”

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