Digital Euro and online payments: a Synergy for the Future

Global Framework

As Europe embraces the digital age, the introduction of a digital euro would represent the next step in the evolution of our currency. Furthermore, digital payments are progressively becoming more popular in a digitized society. Consequently, the European Central Bank (ECB), along with other significant central banks worldwide, is studying the feasibility of integrating cash with a digital currency.

Many of the ongoing projects on the digital euro assess or involve blockchain and distributed ledger technologies. Although they may initially seem contradictory, in fact, the word Blockchain is often associated with decentralization, whereas the Digital Euro, despite being effectively in the form of a digital currency, will be embedded in a centralized context. It is important to clarify that it is not a cryptocurrency.

The need for a Digital Euro arises in response to the increasingly widespread adoption of digital currencies and the rise of cryptocurrencies and stablecoins, as well as to maintain monetary sovereignty.

The only certainty is that many European players in the payments sector are already working on various prototypes, evaluating the various technologies to adopt, hoping that one day this magnificent project will materialize.

Digital Euro: Between Online and Offline Payments

In the various use cases of the digital euro, we find payments in both online and offline modes, thus allowing greater versatility and interoperability with different entities. Unlike online payments, which are widely used in various modes by end-users and require an internet connection, offline payments can be made without a connection, as long as there is physical proximity between devices, for example, the payer’s and the beneficiary’s smartphones.

Furthermore, for online payments, the validation of a Payment Service Provider (PSP) as a third party is necessary to complete transactions, in accordance with payment regulations; however, offline payments would follow a peer-to-peer validation model without any connection to third parties for approval or recording. In addition, payments with digital euros in offline mode would guarantee levels of privacy similar to those of cash, but, just like cash in a lost or stolen wallet, any digital euro stored locally on a lost or stolen device would not be recoverable by either the Eurosystem or the PSP ¹.

¹ European Central Bank, A stocktake on the digital euro, Summary report on the investigation phase and outlook on the next phase, 18 October 2023.