A recent move by Germany’s Bundesbank — endorsing the planned digital euro while simultaneously promoting the use of cash — has highlighted a growing dilemma for central banks across Europe. Despite appearing contradictory, both initiatives reflect one broader concern: Europe is losing control over the infrastructure that processes its money.
Just as electricity and water supply are vital yet often unnoticed until they fail, payments form a crucial part of Europe’s economic backbone. But central bankers warn that their influence over this system is rapidly eroding.
Cash Declines, and With It, Central Bank Influence
For decades, physical cash has been the ECB’s strongest tool to anchor monetary sovereignty. But its use is fading fast:
- Cash was used in only 52% of transactions in 2024, down from 72% in 2019.
- 12% of businesses refuse cash entirely, triple the number from three years ago.
Beyond cultural attachment to banknotes, policymakers see a deeper problem: the rise of alternative payment systems overwhelmingly dominated by non-European companies.
Foreign Payment Giants Dominate Europe
When Europeans put away cash, they mostly turn to American systems:
- Visa, Mastercard, and PayPal control much of Europe’s digital payments market.
- Three-quarters of eurozone countries lack a strong domestic digital payment scheme.
- Stablecoins — digital tokens tied to major currencies — are mostly dollar-based and growing rapidly.
This raises strategic concerns. At a time when Washington openly prioritises American interests and uses economic tools for geopolitical leverage, Europe’s dependence on US-based financial infrastructure presents a significant vulnerability.
Officials warn that a future US administration could theoretically pressure Europe by restricting US payment providers — a scenario that would severely disrupt European commerce.
The Digital Euro: Europe’s Proposed Answer
The ECB’s solution is the planned digital euro, an electronic version of cash that would serve as legal tender across the bloc, usable in stores, online, and for person-to-person transfers. If approved by EU lawmakers, it could launch sometime in the second half of the decade.
But instead of uniting Europe behind a sovereign payment infrastructure, the digital euro has sparked internal rivalry.
Banks Push Back — Fearing Damage to Their Own Solution
Europe’s largest banks — including Deutsche Bank, BNP Paribas, and ING — are lobbying to limit the scope of the digital euro. They argue it could undermine Wero, a new European payments platform launched in 2024 that already has 46 million users.
Wero aims to become Europe’s homegrown competitor to Visa, Mastercard, and PayPal. It began with person-to-person transfers and plans to expand into a full-scale unified payment system.
Banks fear the digital euro could scare off early adopters just as Wero is gaining momentum, weakening Europe’s private-sector alternative.
A Network Problem Complicates Everything
Digital payment ecosystems depend on “network effects” — they only work well if many people use them:
- Merchants are more likely to accept Wero if many customers use it.
- Customers are more likely to use Wero if many merchants accept it.
This classic chicken-and-egg dilemma is difficult even without competition from a potential state-backed rival.
A Risk of Ending Up With Nothing
Timing may prove decisive:
- Wero is expanding now.
- The digital euro won’t arrive before 2029, if at all.
If the digital euro discourages investment in Wero — and is later stalled by political opposition or technical challenges — Europe could find itself in a dangerous position:
having neither a successful digital euro nor a strong European competitor to US payment companies.
This possibility underscores the broader battle Europe faces over the future of its money — and who ultimately controls the basic systems that allow Europeans to pay, trade, and participate in the digital economy.
