One of a central bank’s most basic functions is to issue money that citizens can use to pay. A euro banknote is not merely a piece of paper: it is public money, backed by the central bank and accepted across the euro area in exchange for goods and services. Yet as an ever larger share of everyday commerce moves online, that guarantee has developed a blind spot. The same euro banknote that works at a shop counter cannot be used on a website. For digital payments, Europeans must instead rely on private money and private payment networks.
That gap lies at the heart of the digital euro. Piero Cipollone, a member of the European Central Bank’s Executive Board, has increasingly presented the project not merely as a new payment technology, but as a means of preserving Europeans’ freedom to choose how they pay and strengthening Europe’s autonomy in payments. The project began with an ECB report in 2020 and has since moved steadily closer to implementation. In July, 36 payment service providers were selected to participate in a pilot due to begin in the second half of 2027. The ECB aims to be ready for a possible first issuance in 2029, provided European lawmakers adopt the necessary legislation.
The digital euro did not begin as a geopolitical project. When the European Central Bank started studying it in 2020, the rationale was largely technocratic: as cash use declined and payments moved online, public money had to follow. Since then, economic coercion has changed the political calculus. Washington’s growing willingness to weaponize trade, finance, and technology, including in disputes with allies, has pushed European policymakers to rethink dependencies once treated as harmless. What began inside an independent central bank as monetary modernisation has moved up the European Union’s political agenda as a question of strategic autonomy.
To understand why payments have become a matter of sovereignty, consider the four layers behind a card transaction: the merchant’s payment provider, the acquirer, the card scheme, and the issuing bank. A payment works only because these layers communicate and coordinate within seconds. Yet they are not equally replaceable. A merchant can change acquirer; a bank can change processor. Replacing the network that connects them is much harder.
Card schemes benefit from powerful network effects: the more consumers use one network, the more merchants must accept it, and the more merchants accept it, the more valuable it becomes to consumers. Scale reinforces scale, favouring a handful of global networks, above all Visa and Mastercard. The result is a critical European dependence on US-based payment infrastructure. Two-thirds of euro-area card transactions are governed by the rules of non-European companies.
That makes schemes, in Piero Cipollone’s words, ‘rule-makers’, while European merchants and payment providers are largely ‘rule-takers’. Visa and Mastercard can set fees, technical standards, and dispute procedures across their networks. Brussels has tried to curb that power: since 2015, interchange fees have been capped at 0.2% for debit cards and 0.3% for credit cards. Yet scheme, processing, and compliance fees outside those caps expanded, while average merchant service charges almost doubled between 2018 and 2022. Regulation constrained one fee, while market power found other outlets.
For years, Europe treated its dependence on foreign payment networks mainly as a competition problem. Russia showed that it could also become a geopolitical vulnerability. After sanctions in 2014, Moscow built its National Payment Card System, launched Mir, and moved domestic card processing onto Russian infrastructure. When Visa and Mastercard suspended operations in 2022, cross-border functionality collapsed, but domestic payments continued.
The lesson was simple: Russia had built payment sovereignty before it needed it. Europe faces no comparable threat of isolation, but the logic of dependence has changed. As trade, technology, and financial infrastructure are increasingly used as political leverage, payment networks can no longer be treated as neutral plumbing.
This is where the digital euro becomes more than a digital version of cash. It would give Europe a payment rail governed under European rules and available across the euro area. Visa and Mastercard would not disappear, nor would banks and acquirers such as Nexi. Europe would simply gain something it currently lacks: a credible fallback.
China offers a glimpse of what that could look like. The e-CNY has not displaced Alipay or WeChat Pay, which still dominate everyday mobile payments, but it has created a publicly governed alternative that Beijing continues to expand across banks, retail uses, and cross-border payments. Its value lies less in replacing existing networks than in ensuring that another rail exists if dependence on them becomes a liability.
For European merchants, the immediate difference may therefore be modest; the strategic one is not. A European payment rail would introduce competition where network effects make entry hardest, strengthen Brussels’ bargaining power over fees and standards, and preserve the ability to transact if political relations deteriorate.
The digital euro is less about replacing the card in Europeans’ wallets than about changing who ultimately controls the rails beneath it. In a world where economic interdependence is increasingly used as leverage, payment sovereignty is becoming less a form of protectionism than a form of insurance.
