Roughly two-thirds of euro-area card transactions are processed through international card schemes governed by non-European companies such as Visa and Mastercard, according to the European Central Bank. But the digital euro is the bloc’s attempt to change that, and this year the project cleared its biggest political hurdle yet.
On July 9, the European Parliament voted 416 to 169, with 22 abstentions, to approve its position on the digital euro, a proposed new form of public money that would allow people and businesses in the euro area to make everyday payments using digital money issued by the Eurosystem.
The vote opened negotiations with the Council of the EU, which adopted its own position in December 2025. Talks between institutions began on July 13, with the aim of reaching a deal by the end of the year.
The ECB, which launched its preparations phase in November 2023 and moved the project into its next stage in October 2025, has already selected 36 payment service providers for a 12-month pilot set to begin in the second half of 2027. A first issuance could follow in 2029, provided that the necessary legislation is adopted.
Although the project is designed specifically for the euro area, its development raises questions that extend beyond Europe’s borders. As people around the world move towards non-physical forms of payment, the digital euro has become part of a broader debate about how countries can preserve their monetary sovereignty in an increasingly digital economy.
That debate is particularly relevant to Latin America, where the growing use of dollar-backed stablecoin and reliance on foreign payment infrastructure raise important questions about monetary autonomy.
Understanding the digital euro
To understand the digital euro, it helps to start with the distinction between public and private money, as explained by Francisco José Ciancetta, doctoral researcher and associate lecturer in law at the University of Southampton, member of the European Banking Institute (YRG), and editor of the Banking & Finance Law Review.
“Public money, such as cash and central bank reserves, is issued by the central bank. Cash is available to the general public, whereas central bank reserves are generally held by commercial banks and other eligible financial institutions,” he told EU Reports.
“Then we have private money, which primarily takes the form of deposits created by commercial banks. These deposits represent claims against the banks themselves. When someone uses a debit card, for example, they are generally making a payment using commercial bank money.”
The digital euro, Ciancetta added, would be a digital form of central bank money designed for everyday retail payments: buying goods in a shop, paying online, or transferring funds to another person.
As the ECB describes it, it would function as a form of digital cash that would complement, rather than replace, physical banknotes and coins.
From payment networks to domestic power
According to Ciancetta, the declining use of physical cash, combined with the growing popularity of digital payments, has reduced the role of central bank money in everyday retail transactions. At the same time, much of the infrastructure behind digital payments in Europe is operated by companies headquartered outside the region, fuelling concerns about the region’s dependence on foreign payment networks.
In this sense, the digital euro project can be understood as an effort to strengthen Europe’s strategic autonomy and resilience in the payments market.
“The central bank aims to preserve the monetary sovereignty of the euro area. That is one of the key reasons why the project is being developed,” said Ciancetta.
Meanwhile, the United States, the world’s largest economy, is pursuing a different approach.
“The U.S. government has prohibited federal agencies, subject to certain legal exceptions, from establishing, issuing or promoting central bank digital currencies,” he explained. “Instead, it has chosen to promote dollar-backed stablecoins, which are privately issued digital assets designed to maintain a stable value relative to the U.S. dollar.”
The two pathways therefore reflect different policy priorities: while the U.S. is seeking to amplify the international role of the dollar through the development of privately issued, dollar-backed stablecoins, the euro area is exploring a digital form of central bank money.
Ultimately, the digital euro is intended not only to preserve public access to central bank money in an increasingly digital economy, but also to strengthen Europe’s strategic autonomy, resilience and competitiveness in the payments market.
Latin America’s digital infrastructure
Latin America has already moved to reduce its reliance on foreign-dominated payment networks, but through public payment systems instead of Central Bank Digital Currencies (CBDCs).
Brazil’s Pix, for instance, is operated by the Central Bank of Brazil and has become the country’s leading instant-payment system. Other nations, including Colombia, Mexico, Chile and Argentina, have also created domestic payment infrastructures: Bre-B, SPEI, TEF, and Transferencias 3.0, respectively.
According to Ciancetta, these systems were designed partly to reduce dependence on particular private payment networks and promote competition in the payments market. However, they do not fundamentally change the nature of the money being transferred; the funds continue to be held in transaction accounts provided by participating financial institutions, rather than being issued directly to the public as central bank digital currency.
This is where the digitalisation of the euro becomes particularly relevant, because unlike Pix or Bre-B, it would put central bank money directly in the hands of the public.
“The digital euro could represent a significant competitive challenge for major banks and payment companies,” Ciancetta explained. “If a form of digital currency were to be implemented in Latin America for retail purposes, it could have a similar effect, potentially reshaping the relationship between central banks, commercial banks and private payment providers.”
Research on the region suggests that the inclusion of CBDCs would benefit the countries’ economies through the promotion of financial inclusion, boosting of transaction efficiency, and growing competition in the payments system field, though researchers note that well-designed instant payment systems can deliver many of the same gains.
As central banks in Latin America continue to weigh the potential introduction of CBDCs, the digital euro gives them a real-world test case. If it proves effective, it could shape how developing countries think about regaining control over their own financial structures and reducing their dependence on foreign payment networks and the dollar.
What to watch next
For Europeans, the next round of talks is on November 5, when EU negotiators hold another political trilogue. Some of the most consequential details are still open, including how many digital euros each person will be allowed to hold and how payment service providers will be compensated.
A political deal would not be the final step, either, as the agreed text still needs a new vote before becoming law, and the ECB’s Governing Council will only decide whether to issue the digital euro once the regulation is adopted.
Latin Americans have their own reasons to follow those talks, too. In late October, negotiators examined the conditions for using and distributing the digital euro outside the euro area, a question that will shape just how far Europe’s model can travel.
Closer to home, Colombia’s central Banco de la República expects to finalise regulation before the end of the year that will extend Bre-B to payroll, supplier payments and other business transactions during 2027, testing how far a domestic instant-payment system can go without becoming a CBDC.
Featured image: via European Central Bank
