Money in the digital age: digital euro, tokenisation and the role of central banks

For centuries, central banks have issued money and safeguarded its value, but the rise of digital payments and distributed ledger technology is reshaping finance. The ECB warns that without a digital form of public money, the role of central bank money may decline, leaving Europe without a pan-European digital payment solution for everyday transactions. Fragmentation in tokenised finance could weaken the singleness of money, while reliance on non-European infrastructures risks reducing monetary sovereignty and resilience.

The ECB proposes extending central bank money into the digital environment while maintaining the two-tier monetary system, where public and private money coexist. In retail payments, this involves preparing for a digital euro, while in wholesale markets, initiatives like Pontes aim to enable central bank money for settling tokenised transactions. The ECB also works with the market through Appia to shape the broader digital finance ecosystem, ensuring European participants can innovate and remain competitive.

In retail payments, the digital euro would address the lack of a European digital means of payment that works across all euro area countries and major use cases. Currently, European private solutions are often limited to specific markets or payment situations, forcing reliance on international card schemes and global technology companies for two-thirds of euro area card payments.

The ECB highlights that 13 of the 21 euro area countries lack a domestic card scheme, and where one exists, it may not cover all use cases or enable cross-border use without co-badging with international schemes. This dependence affects sovereignty, resilience, and competitiveness, as European providers struggle to compete with global solutions due to the high cost of developing Europe-wide acceptance networks.