The European Union and the European Central Bank (ECB) have for years been announcing the digital euro as a key tool for strengthening sovereignty in the digital world, said international and economic policy expert Nemanja Plotan.
- In an era of fragmentation of the global financial system, for the European Union this is not merely a technical or practical issue, but a matter of Europe’s strategic autonomy in geopolitical competition with the United States, China, and the private sector, where cryptocurrencies and stablecoins are increasingly dominant – Plotan emphasized.
According to available data, six out of ten financial transactions in Europe pass through American systems such as Visa, Mastercard, and PayPal. In the event of greater geopolitical tensions, such dependence could turn into vulnerability.
In practice, the digital euro is intended to be Europe’s response to these challenges—a form of public money backed by the ECB’s balance sheet, functioning as digital cash, legal tender, and an offline payment solution.
On one hand, arguments in favor of the digital euro are convincing from the perspective of monetary and payment sovereignty. Bruegel notes that the real reason is precisely monetary sovereignty, meaning the ECB must occupy space in the digital realm to prevent the private sector from filling this financial vacuum and directly threatening the stability of the euro.
A potential collapse of cryptocurrencies and stablecoins could revive the dynamics of the eurozone crisis from 2010 to 2015, when differences in credit risk among eurozone countries became an existential threat.
In that context, the digital euro would act as an economic anchor, protecting the credibility of the euro and preventing financial fragmentation. Alongside it is Wero, a European digital wallet and mobile payment system as a private-sector solution for everyday use.
The ECB officially describes the digital euro as a simple tool: money is transferred from a bank account into a digital wallet, enabling offline or online payments, free of charge within the eurozone, with options for conditional payments (e.g. payment upon delivery).
As stated, the use of the digital euro would not be restricted, though limits on wallet balances would be introduced to prevent massive outflows of deposits from banks.
The goal is clear: greater competition, system resilience, and more choice for citizens, banks, and merchants. In geopolitical terms, it is a response to American dominance in payment infrastructure and China’s digital yuan, which is already testing similar models of control over payments.
Europe clearly does not want others—neither Washington, Beijing, nor private actors from Silicon Valley—to dictate the rules in the digital era.
On the other hand, critics warn that this narrative of sovereignty may conceal another side. The libertarian Cato Institute argues that the digital euro is not designed to expand citizens’ freedom, but rather to strengthen central bank control in the age of cryptocurrencies.
While presented as protection from external influence, Europe is simultaneously introducing limits on cash (planned caps of 10,000 euros), prepaid cards, and private crypto wallets to curb illegal financial activity.
Critics further warn that the digital euro could facilitate transaction tracking, enabling more efficient taxation and surveillance, similar to the Chinese model.
Judith Arnal of CEPS points out that comparisons are often misleading: American private companies like Visa or Apple Pay are not equivalent to geopolitical risks posed by states. A true geopolitical disruption of payment systems would be an extreme measure, likely only in the event of a collapse of alliances such as NATO—at which point cash and debit cards would be equally affected.
From a geopolitical perspective, the digital euro is a classic example of Europe seeking a favorable position in a multipolar world. The United States dominates payment networks and can use that power for sanctions, as seen with Russia, while China already operates a digital yuan, giving it an advantage in Asia and digital trade.
Stablecoins, typically pegged to major currencies like the dollar, also pose a risk of eroding the euro if the ECB does not respond. The digital euro is intended to ensure that public money does not disappear in the digital age and that Europe retains control over its financial system.
However, the question remains whether this will truly strengthen Europe’s strategic autonomy or simply shift power from private actors to the ECB and Brussels institutions.
The digital euro may serve as a legitimate shield against external dependencies, financial crises, and geopolitical risks, but it also carries the risk of greater centralization. In a geopolitical arena where money is increasingly becoming a tool of power, Europe is choosing the path of public sovereignty.
Whether this leads to greater resilience or a new form of control will depend on how the project is implemented. Citizens, banks, and policymakers in the European Union must ensure that “sovereignty” does not become synonymous with less choice and more oversight.
Source: RTRS
