{"id":1454972,"date":"2025-11-19T17:15:28","date_gmt":"2025-11-19T16:15:28","guid":{"rendered":"https:\/\/www.ie.edu\/insights\/?post_type=articles&p=1454972"},"modified":"2025-11-19T17:15:28","modified_gmt":"2025-11-19T16:15:28","slug":"the-digital-euro-lets-go-hybrid-but-with-a-public-backup","status":"publish","type":"articles","link":"https:\/\/www.ie.edu\/insights\/articles\/the-digital-euro-lets-go-hybrid-but-with-a-public-backup\/","title":{"rendered":"The Digital Euro: Let\u2019s Go Hybrid \u2014 But with a Public Backup"},"featured_media":1454973,"template":"","meta":{"_has_post_settings":[]},"schools":[],"areas":[728],"subjects":[416,422],"class_list":["post-1454972","articles","type-articles","status-publish","has-post-thumbnail","hentry","areas-europe","subjects-business-and-finance","subjects-innovation-and-technology"],"custom-fields":{"wpcf-article-leadin":["Europe\u2019s bid for monetary sovereignty faces a defining test. Miguel Otero and Gonzalo Rodr\u00edguez ask if the digital euro can unite innovation and independence amid political divides and industry resistance."],"wpcf-article-body":["Few projects capture Europe\u2019s struggle to combine integration, innovation, and sovereignty as clearly as the digital euro. Despite being a key strategic tool for monetary and financial sovereignty, the project remains mired in political and industry disagreements \u2013 primarily from commercial banks, but also within the European Parliament \u2013 where discussions over its design and purpose have dragged on.\r\n\r\nSpanish MEP Fernando Navarrete of the European People\u2019s Party (EPP), the Parliament\u2019s rapporteur on the digital euro, has been one of its most vocal critics, repeatedly questioning whether the project is necessary at all<\/a>. In the private sector, scepticism is also widespread: while some welcome the digital euro (especially in its wholesale form) as a step toward innovation, many raise concerns about its architecture, potential market distortions, and unclear added value.\r\n\r\nHowever, one of the primary aspects of Europe\u2019s strategic autonomy is reducing dependence on external payment infrastructures. Europe\u2019s heavy reliance on US-based systems such as Visa and Mastercard exposes a core vulnerability in its financial system. In this regard, the digital euro (both wholesale and retail) is not just desirable but increasingly necessary. The real debate is how far the European Central Bank (ECB) should rely on \u2013 or diverge from \u2013 existing market infrastructures when building it.\r\n\r\nThe choice, then, is between a fully public system built from scratch, a hybrid model that leverages Europe\u2019s existing though still incomplete European private solutions, or an offline-only \u2018digital cash\u2019 proposed by Navarrete\u2019s draft report<\/a>.\r\n\r\nThe Eurosystem\u2019s ambition is to provide a seamless payment experience across peer-to-peer transfers, e-commerce, and in-store transactions throughout the eurozone. And it argues that achieving this vision would require building a completely new infrastructure from scratch: connecting thousands of payment service providers across twenty countries, onboarding merchants, integrating with existing payment gateways, and creating a user-friendly digital wallet.\r\n\r\nAt first sight, building the digital euro entirely as a public system would be an ambitious choice \u2013 one that offers clear strategic benefits but also major operational and financial challenges. Yet a system designed from the ground up for all member states could bridge the legal, technical, and cultural divides that still fragment Europe\u2019s payment landscape. Under this logic, the case for a public infrastructure is not only about uniformity and control but also about resilience \u2013 a just-in-case<\/em> safeguard in case the private sector cannot deliver. It acknowledges that some forms of sovereignty in critical infrastructure are worth pursuing and preserving, even at a higher cost.\r\n\r\nBut the challenge is more than just technical. In this scenario, the public sector would also need to prove it can deliver innovation and user experience at the pace of private competition \u2013 something the ECB was never designed to do. Critics also warn that a one-size-fits-all model like the digital euro could struggle to adapt to Europe\u2019s diverse payment landscape<\/a>, where local schemes and consumer behavior vary widely across countries.\r\n\r\nWhy a Hybrid Model Makes Sense<\/strong>\r\n\r\nUnder these circumstances, a hybrid model offers Europe the most logical path forward: it builds on private payment infrastructure where it already performs well, while ensuring a fully public backbone remains in place as a strategic safeguard. A purely public model would be costly and slow to deploy, while a purely private one would leave the continent dependent on infrastructure that may never achieve full EU-wide interoperability.\r\n\r\nBy weighing cost, speed, and sovereignty, this hybrid path offers a pragmatic way forward for Europe\u2019s payment infrastructure. Progress remains fragmented across markets \u2013 several EU countries still lack national schemes capable of connecting to this emerging network \u2013 but private initiatives of instant payments have advanced toward interoperability.\r\n\r\nOver the past few years, Europe\u2019s private sector has been developing digital payment solutions built on the Eurosystem\u2019s own infrastructure. At its core lies TIPS, the ECB\u2019s Target Instant Payment Settlement system, which enables instant transfers between banks across the EU.\r\n
Building on what already exists could make the digital euro cheaper, faster to deploy, and more relevant.<\/blockquote>\r\nOn top of this backbone, two regional initiatives are driving digital payment interoperability. In Southern Europe, the European Payments Alliance (EuroPA) \u2013 led by Bizum (Spain\/Andorra), Bancomat (Italy), and MB WAY (Portugal) \u2013 already connects (at least in theory) tens of millions of users, and plans to expand to Poland, Greece, and the Nordics. In Central and Northern Europe, the European Payments Initiative (EPI) and its wallet \u201cWero\u201d unite banks from Germany, France, Belgium, and the Netherlands. In June 2025, EuroPA and EPI agreed to collaborate toward full interoperability across roughly 15 countries<\/a> \u2013 covering about 84 percent of the EU population.\r\n\r\nGiven this private-led progress, many in the payments industry question the need for yet another layer of infrastructure when Europe is already investing in a continent-wide instant payments network. Incidentally, since October 9, 2025, new EU rules<\/a> have made instant euro transfers available within seconds across the eurozone. Payment service providers must now offer clients the ability to send and receive instant payments, verify recipients\u2019 names free of charge, and ensure that these services cost no more than standard transfers.\r\n\r\nThese changes bring Europe a step closer to a more connected payments landscape driven by private European actors. They reinforce the role of existing private infrastructures as the basis for deeper integration. Thus, building on what already exists could make the digital euro cheaper, faster to deploy, and more relevant within Europe\u2019s evolving payment ecosystem.\r\n\r\nHowever, progress toward interoperability could become difficult if the digital euro continues down the road of building its own parallel infrastructure. Hence, advocates of a hybrid model argue that the digital euro could fit naturally within this ecosystem rather than competing with it. Integrating it into existing services, such as Bizum or Wero, would ensure continuity for users and merchants alike \u2013 same apps, same habits, but with an added layer of public trust.\r\n\r\nWhat the private sector asks for is time and fair regulation: space to let these systems mature, and a level playing field so that public and private solutions can coexist without distorting competition. Yet this approach relies on the uncertain assumption that private infrastructures will eventually reach full interoperability, and overcome the governance hurdles across the EU. Should that fail, Europe could once again find itself dependent on external providers for one of its most strategic functions: money itself.\r\n\r\nAmong these debates, an alternative line of thinking \u2013 advocated by the Parliament\u2019s rapporteur and popular among banking associations \u2013 argues that if the digital euro is meant to replicate the key features of cash, it should focus solely on its offline functionality. In this approach, the digital euro would act as a complement to physical money, allowing people to make digital payments without an internet connection, while leaving the online payments space to private providers.\r\n\r\nThis perspective stems from concerns that a full-scale public rollout could overwhelm the financial and technical capacity of banks already stretched by a web of regulatory mandates<\/a>. Introducing a new digital euro infrastructure on top of this would require banks, merchants, and payment gateways to integrate yet another system \u2013 diverting limited resources from existing European initiatives such as Bizum, Wero, and Bancomat.\r\n\r\nThe risk, critics warn, is a crowding-out effect: if the ECB\u2019s digital-euro infrastructure becomes the new priority, banks may shift focus toward compliance with the ECB requirements for the digital euro \u2013 and the global networks like Visa and Mastercard \u2013 at the expense of developing Europe\u2019s own private payment solutions.\r\n\r\nThese concerns are certainly valid, but the reality is that the private sector may never be able to deliver a comprehensive pan-European payment infrastructure, so the case for a fully public option \u2013 just in case, and available both offline and online \u2013 remains a safeguard for resilience and strategic autonomy.\r\n\r\nRecent ECB comments challenge the idea that a digital euro offline should be the way forward. As Alessandro Giovannini argues, an offline-only solution would not suffice<\/a>. Both online and offline capabilities should be available from the start. This stance aligns with a hybrid model with a public core, as argued here.\r\n\r\nAs the project moves from concept to implementation, Europe must decide whether payment sovereignty should come from public infrastructure or from regulated private innovation. A fully public model may bring greater certainty, but at a higher cost. A private-led path builds on existing innovation yet depends on greater industry coordination and time to mature. And a more limited, offline-only version could preserve the cash-like nature of money while easing pressure on banks and domestic networks.\r\n\r\nStill, if Europe invests in public infrastructure for offline payments, would it not make sense to use it for the online mode as well?\r\n\r\nIn any case, it is important to highlight that none of these paths would spell the end of traditional cash. Both the European Commission and the ECB insist that the digital euro is meant to complement, not replace, banknotes and coins. Yet questions persist about how the two would coexist in practice \u2013 how much digital money people could hold and whether its use would remain optional.\r\n\r\nThe European Parliament now faces one of its most technically demanding financial debates in recent years. To navigate it responsibly, policymakers will need to rely on expert insight, private innovation, and public trust \u2013 ensuring that informed voices, not fear or disinformation, guide the debate on how Europeans will understand and use money in the digital age.\r\n\r\n \r\n\r\n\u00a9 IE Insights."],"wpcf-audio-article":["https:\/\/www.ie.edu\/insights\/wp-content\/uploads\/2025\/11\/PlayAI_The_Digital_Euro_Let_s_Go_Hybrid_But.mp3"],"wpcf-article-extract":["Europe\u2019s bid for monetary sovereignty faces a defining test. Miguel Otero and Gonzalo Rodr\u00edguez ask if the digital euro can unite innovation and independence amid political divides and industry resistance."],"wpcf-article-extract-enable":["1"]},"_links":{"self":[{"href":"https:\/\/www.ie.edu\/insights\/wp-json\/wp\/v2\/articles\/1454972","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.ie.edu\/insights\/wp-json\/wp\/v2\/articles"}],"about":[{"href":"https:\/\/www.ie.edu\/insights\/wp-json\/wp\/v2\/types\/articles"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.ie.edu\/insights\/wp-json\/wp\/v2\/media\/1454973"}],"wp:attachment":[{"href":"https:\/\/www.ie.edu\/insights\/wp-json\/wp\/v2\/media?parent=1454972"}],"wp:term":[{"taxonomy":"schools","embeddable":true,"href":"https:\/\/www.ie.edu\/insights\/wp-json\/wp\/v2\/schools?post=1454972"},{"taxonomy":"areas","embeddable":true,"href":"https:\/\/www.ie.edu\/insights\/wp-json\/wp\/v2\/areas?post=1454972"},{"taxonomy":"subjects","embeddable":true,"href":"https:\/\/www.ie.edu\/insights\/wp-json\/wp\/v2\/subjects?post=1454972"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}