Monetary sovereignty has once again become a hot topic in Europe. Initiatives to create a digital euro, diversification of euro-backed steelcoins, and domestic alternatives to US-owned payment systems have all accelerated.
The apparent goal is greater European control over its core payments infrastructure. However, there is a wider opportunity for this to play out: laying the right foundations for the emerging ecosystem of tokenized finance.
As settlement models evolve and digital assets proliferate in capital markets, European payments infrastructure innovation will shape how effectively the region can support the acceptance of money and assets. Securing participation from a wide range of regulated payments companies will be essential for long-term success.
At the core of these initiatives is the digital euro. The European Union Parliament’s vote on February 10 to support the European Central Bank’s proposal for an online and offline central bank digital currency marked an important step towards the necessary legislative framework.
The ECB is currently in its preparatory phase, with a decision on whether to issue a digital euro expected after the completion of the legislative process. If a political agreement is reached between Parliament and the Council this summer, and if the technical work goes well, we will see a pilot in early 2027.
When the time comes, the design and implementation of the ECB must not lose sight of the main principle: the European single market functions best as a dynamic, competitive environment. In payments, this means ensuring that the digital euro benefits from the bloc’s diverse ecosystem of EMIs and fintechs.
The question now is whether the digital euro creates an open platform for innovation or a closed shop that quietly re-centralizes power to a powerful few.
EMIs and Fintechs are not additive in the market; They are the primary engines for reaching businesses and consumers that traditional banking institutions have historically underperformed. If euro-based centralized taxation is to succeed, EMIs and fintechs must be involved in the design of the digital euro from the start.
We’ve been here before. The SEPA and TARGET2 rails were built first and foremost for banks, with non-bank EMIs and payments institutions waiting over a decade to gain full rights to direct participation.
The risk is that history repeats itself, and a “banks first, everyone else” position is adopted: in other words, a digital SEPA 2.0 scenario. At best, it would be a missed opportunity; At worst, it represents a structural bias against the institutional firms that drive most payment initiatives in Europe.
We need a seat at the table during the 2027 real-world pilot phase to ensure these trains are built for the current and future economy, not just legacy systems. The design brief should be simple: any bank, EMI or PSP that is fully authorized, supervised, and already serves customers in Euros should be involved in the creation and use of the new rails from day one.
The retail digital euro is only one side of the coin. One of the strongest cases for the digital euro is its potential at a wholesale level. Commoditized central bank money – the ECB’s “Appia” track – promises “nuclear settlement”, with cash and assets moving simultaneously, effectively eliminating delays and liquidity drags in cross-border payments.
This could be a game changer. I say “could” because any efficiency gains from central bank money depend entirely on the availability of infrastructure to all players. If only a limited number of large banks integrate directly with securitized settlement, everyone else will be forced to go through them, reintroducing cost, friction and dependency to a system capable of securitization.
While an independent alternative to USD CBDC or stablecoin is strategically vital, it is only important that businesses and consumers use it. In a fast-paced market where private wallets, blockchains and fintech apps offer speed, transparency and control, a complex CBDC cannot compete effectively. The user experience must match or exceed the rapid volatility of the fintech solutions they currently use.
Fintechs have moved into the gaps left by traditional banking. Today, EMIs and PSPs help issuers manage FX risk, support markets with thousands of micro-transactions, and free up cash flow for SMEs through real-time settlement trains.
Failure to invite fintechs to the table in the pilot phase puts the digital euro at risk of becoming an impotent autonomous instrument, overlooked in favor of greener, better external alternatives.
Just this week, Bundesbank President Joachim Nagel – considered one of the ECB’s most conservative voices – argued that a euro-denominated stablecoin could be valuable for low-cost international transfers, complementary to – not competing with – the digital euro. This is an important admission. If the future is to assume that public and private euro money co-exist to rely on dollar-based rails, then designing a bank-only, closed CBDC platform would be a contradiction in terms.
The Bank of England’s work on a potential digital pound faces a similar choice. The UK already has a strong track record with fintech providers, and it can’t just create a central bank product that sides with the trailblazers that made it a global fintech leader.
The lessons from Europe are clear. Digital labs and pilots should be more than structured experiments with legacy institutions. Here the focus should be on usability, interoperability and reliability. And that means prioritizing non-banks from the start.
The digital euro should be a truly collaborative effort that treats payment providers as integral players in the new economy. This is what fair play looks like in the digital age.
James Simcox, COO and CPO at Equals Money x Railsr
“Why the Digital Euro Should Be an Open Platform, Not a Closed Store” was originally developed and published by Electronic Payments International, a brand owned by Global Data.
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