After years of a hesitant and uncertain trajectory, the European Central Bank (ECB) has significantly accelerated its efforts on Central Bank Digital Currencies (CBDCs). Within just a few months, the ECB has decided to move forward with the final phase and roadmap for issuing the digital euro, its retail CBDC (rCBDC) intended for use by the general public. At the same time, it approved the launch of two wholesale CBDC (wCBDC) projects—Pontes and Appia—developed under the “New Technologies for Central Bank Money Settlement” initiative, designed exclusively for interbank transactions between financial institutions. Such a significant shift in speed has been largely driven by external pressures. First, as argued by Draghi in his report on the Future of European Competitiveness, “dependencies are becoming vulnerabilities.”[2] The EU is highly dependent on foreign providers for its retail card-based transactions, with two-thirds of its internal transactions processed by US-based Visa and Mastercard. Simultaneously, as clearly shown in 2018 with the US unilateral sanctions against Iran, global wholesale systems continue to rely heavily on the US dollar and US-based institutions.

In this framework, while only 40% of extra-EU imports are invoiced in euros, 51% are in dollars—largely due to dollar-denominated oil imports. This imbalance, combined with the fact that over 90% of large-value dollar transactions are settled via US-based systems like CHIPS and Fedwire, underlines the EU’s reliance on the US dollar and US financial infrastructure.[3] This latter aspect is also closely connected to the euro’s international role. While the ECB has historically maintained a passive stance, neither encouraging nor obstructing the euro’s global adoption,[4] this approach shifted in 2018 with the “Towards a Stronger International Role of the Euro” communication, which recognized the euro’s underutilization in global markets while simultaneously highlighting its potential to strengthen the EU’s financial and political influence in an increasingly multipolar world.[5] Despite the euro’s position as the world’s second-largest international currency, its reliance is evident in various domains, from trade invoicing to payment infrastructure, which reinforces vulnerabilities that limit the EU’s strategic autonomy.[6]

Second, the growing interest in alternative digital assets has become a source of concern for EU policymakers. The wake-up call came with the announcement of Facebook’s Libra project in 2019, which signaled the disruptive potential of privately issued global stablecoins. Today, however, the more systemic risk lies in the US administration’s regulatory supportive stance toward dollar-based stablecoins and the resulting increase in market-driven new initiatives. These digital assets could serve as vectors for expanding the global footprint of the US dollar through alternative digital channels, including in EU markets. This could pose financial stability risks, including the threat of euro deposit substitution and the potential for a systemic run on redemptions with global spillovers.[7] Furthermore, it could challenge the EU internal market in both retail and wholesale transactions: widespread use of dollar-backed stablecoins could further consolidate the dollar’s dominance and create competition with central bank money as an alternative settlement asset in emerging markets for tokenized securities.

Despite the ECB’s rCBDC and wCBDC initiatives having distinct operational frameworks and objectives, they both aim to strengthen the EU’s monetary power in a growing multipolar world. This conceptual framework encompasses the dual concepts of autonomy and influence.[8] The former refers to a state’s ability to reduce the exposure of its monetary system to external pressures (autonomy), while the latter refers to its capacity to shape the global financial system in its favor (influence). Adopting this lens, the digital euro project is primarily a mechanism for autonomy by establishing a pan-European retail payment infrastructure, while euro wCBDC explorations represent an emerging, if tentative, attempt to mitigate future risks of dependency while exercising international leadership. These objectives are not mutually exclusive but emerge through different institutional pathways and political conditions.

1. Wholesale and Retail Digital Euro: Timeline and Pipeline

The digital euro project is a legislative proposal currently under discussion. The ECB began exploring this concept by publishing a “Report on a Digital Euro” in October 2020. In July 2021, the ECB Governing Council officially launched the digital euro project. The project consists of three phases: the Investigation phase (October 2021 – October 2023), the Preparation phase (November 2023 – October 2025), and the Implementation phase (starting November 2025). In October 2025, the ECB decided to move to the next phase of the project. Since the official issuance of the digital euro by the ECB Governing Council is contingent on the adoption of a legislative act, it also communicated that—if legislation is in place by 2026—a pilot exercise could begin in 2027, with the Eurosystem potentially ready for a first issuance of the digital euro by 2029. In this sense, parallel to the ECB’s preparatory work, the European Commission published the Digital Euro Package in June 2023. At this stage, these proposals are in the early stages of the legislative process, with no formal position agreed upon by the European Parliament or the Council.[9]

While there is always confusion, the ECB’s work on a wholesale digital euro is progressing in parallel—and yet complementary—with its development of the digital euro for retail use. Officially referred to as “New Technologies for Central Bank Settlement,” this initiative explores innovations in wholesale financial transactions and interbank settlement mechanisms. A form of wholesale CBDC already exists, as central banks currently provide digital settlement assets to financial institutions. However, the ECB’s efforts seek to enhance these systems through new technological advancements. Exploring new technologies for wholesale transactions builds upon TARGET (Trans-European Automated Real-time Gross Settlement Express Transfer System), which is the Eurosystem’s infrastructure for settling large-value payments in euros in real time.

Since 2023, the ECB has begun exploring the potential application of DLT solutions in central bank money settlement, resulting in the development of three interoperability-type solutions for exploratory work. First, the TIPS Hash-Link Service Description establishes an interoperability bridge between a DLT platform and the TIPS payment system (a copy of TIPS was used for experimentation purposes). Second, the Trigger Solution Documentation acts as a technical bridge between market DLT platforms and the Eurosystem’s T2 RTGS. Third, the Full DLT Interoperability enables the settlement of wholesale transactions in central bank money directly on a DLT platform by tokenizing central bank money and integrating it with the Eurosystem’s RTGS (T2). Between May and November 2024, the Eurosystem conducted a series of trials and experiments involving over 200 transactions valued at €1.59 billion. A total of 64 participants, including central banks, financial market participants, and DLT operators, completed more than 40 trials and experiments. The trials involved actual settlements using central bank money, while the experiments used mock transactions for testing purposes.

In February 2025, following the lessons learned from the three pilots, the ECB decided to proceed with a dual track. Pontes is designed as a short- to medium-term pilot project, scheduled for implementation by the end of the third quarter of 2026. Pontes employs a dual-settlement model enabling transactions to settle either on the Eurosystem’s DLT platform, utilizing tokenized central bank money, or via T2 RTGS for traditional cash settlement. This approach leverages lessons learned from the 2024 exploratory phase, integrating interoperability solutions while aligning with TARGET’s operational, legal, and technical standards. A long-term pilot for Pontes is planned for launch by the end of Q3 2026 and will build upon components already proven in 2024 experiments. Appia, in contrast, represents a long-term vision, with no planned timeline.[10]

2. Monetary Power in Action

In the retail payments and settlements domain, autonomy has become a pressing policy objective due to existing dependencies on foreign providers for card payment schemes and mobile payment apps, as well as emerging risks related to US-denominated stablecoins. This is clearly shown by the shifting narrative behind the digital euro. The ECB’s initial engagement framed its rationale within a behavioral logic: evolving consumer preferences and the progressive decline of cash in point-of-sale transactions. While empirically grounded—cash usage fell from 72% in 2019 to 52% in 2024—online payments now represent 21% of all daily transactions and 36% of the total transaction value.[11] This narrative presents digitization only as a neutral, demand-driven transformation.

However, this transition to cashless payments is not merely a technological or market trend but a reconfiguration of the power balance, exposing a critical structural vulnerability. This dynamic raises fundamental questions about the EU’s monetary power in an era when payment infrastructure is both a strategic asset and a vector of geopolitical dependency.[12] This logic applies directly to the eurozone, where 13 of 20 member states lack domestic card schemes and must co-badge with foreign ones to operate within their borders.[13] Even national systems, such as Italy’s Bancomat or France’s Cartes Bancaires, rely on international networks for interoperability, rendering European transactions vulnerable to extraterritorial regulation and policy misalignment, as foreign entities operate within legal and political jurisdictions that may not always align with European strategic interests.

Over the past years, the ECB has undergone a marked shift in how it frames the political and strategic significance of the digital euro project. The ECB started to position its project not simply as a complement to cash but as a lever for reinforcing European monetary sovereignty. From a technical point of view, the ECB believes that a digital euro infrastructure might rebalance its autonomy in digital payments, enabling a public infrastructure to regain control over private foreign providers. In practice, the current card payment system utilizes payment networks, such as Visa and Mastercard, which facilitate electronic transactions between cardholders, merchants, issuing banks (the cardholder’s bank), and acquiring banks (the merchant’s bank). When a cardholder initiates a purchase, a payment network acts as an intermediary, routing the transaction details from the merchant to the issuing bank for authorization. The issuing bank verifies the cardholder’s account for sufficient funds or credit and approves or declines the transaction. The payment network then ensures the clearing and settlement of funds, transferring money from the issuing bank to the acquiring bank while deducting fees for its services.

Payment networks own the infrastructure that enables their intermediation function. However, with the development of a digital euro, the ECB would provide such underlying core infrastructure upon which European and non-European providers can develop their front-end solutions. Furthermore, this stance is also enforced by procurement rules for the development of the digital euro’s core infrastructure, which restrict participation to European IT companies.

The digital euro is thus positioned as a foundational element to ensure that critical infrastructure is under European governance, thereby reducing exposure to external coercion. While the ECB’s initiative aspires to enhance autonomy by asserting infrastructural control, the causal link between creating new infrastructure and achieving monetary autonomy remains analytically tenuous. It presupposes not only that the infrastructure will be successfully developed and adopted but also that it will displace or substantially reduce reliance on incumbent foreign payment providers.

This outcome depends on several conditions: the extent to which banks and merchants integrate the digital euro into their operations and the willingness of consumers to shift established payment habits. Moreover, market dynamics further complicate the picture. The digital euro model, while pragmatically framed as a partnership between public infrastructure and private innovation, rests on a fragile assumption: that the creation of a centralized European infrastructure will meaningfully reduce dependency on entrenched foreign actors while fostering EU-native digital payment solutions. Nevertheless, incumbent foreign providers benefit from strong network effects and high switching costs, positioning them as the default choice—even within the emerging digital euro ecosystem.

However, from a different perspective, what if adoption is not the key driver or objective? That may sound provocative, but the strategic value of the digital euro might lie not primarily in everyday usage but in establishing a parallel, EU-controlled domestic infrastructure that can be fully mobilized in the event of disruption from foreign-owned systems.

Instead, although the EU already retains a high degree of autonomy in euro-denominated wholesale payments and settlements, supported by robust, domestically governed infrastructures such as TARGET2 and TARGET2-Securities (T2S), EU policymakers are increasingly concerned that US-denominated stablecoins could also pose risks to the settlement of wholesale transactions within the eurozone.[14] Pontes becomes the short-term public solution to provide market participants with a similar technological and technical infrastructure to tokenization using central bank money, thereby avoiding the re-creation of dependencies on foreign assets or providers.

While the face of monetary power related to autonomy is straightforward, the second dimension of monetary power connected to influence is more subtle. It requires the ability to shape global monetary dynamics in line with strategic preferences. In this respect, both the digital euro project and the explorations of a euro wCBCD present an ambiguous case. While the ECB has consistently emphasized the domestic focus of both initiatives, implicit within its long-term vision is the ambition to expand the euro’s international role, transforming both initiatives’ CBDCs into a vehicle for global influence. These initiatives will not affect the fundamental factors that anchor the international role of the euro. They will not address the fragmented and incomplete nature of the EU’s Economic and Monetary Union (EMU) or the absence of common safe assets that central banks and international investors could adopt as a store of value. As Eichengreen[15] and Helleiner[16] have noted, the determinants of an international currency status are institutional, not merely technological or infrastructural.

Against this backdrop, euro CBDCs cannot single-handedly catalyze internationalization, but they may serve as a strategic complement to foster the international role of the euro. The development of a more efficient rCBDC and wCBDC financial infrastructure could, in principle, enable central banks to settle cross-border payments directly, thereby reducing transaction costs and latency while simultaneously mitigating structural reliance on the dollar-centric correspondent banking model.[17]

ECB officials have occasionally gestured toward this potential. In a 2020 address, Executive Board member Fabio Panetta linked the digital euro to the EU’s global role, suggesting that if made accessible beyond the eurozone, the CBDC could enhance the euro’s attractiveness as a payment vehicle for non-residents.[18] Cipollone also argued that a wCBDC could enable European firms to transact globally without relying on dollar-based intermediaries.[19] Yet, beyond such rhetorical gestures, the ECB has offered little concrete detail on how both initiatives would advance the internationalization agenda. The strategic mechanisms by which it would incentivize the euro in global trade, finance, or reserves remain underspecified. Official documentation broadly discusses faster and more secure cross-border payments but does not clarify how these would translate into increased demand for euro-denominated assets or long-term geopolitical leverage.

As a retail CBDC, the potential cross-border usage of the digital euro project appears limited. Despite being a limited market, the ECB is making an effort to incentivize the use of the euro in cross-border retail transactions. The development of the digital euro has led to the establishment of formal regulatory standards for its use beyond the euro area. Initially, non-eurozone countries needed formal agreements with the ECB to adopt it. However, legislative discussions led to a revision: foreign merchants will be able to accept digital euro payments without such agreements, as they hold zero balances and convert funds immediately. This change applies only to retail transactions, maintaining limits while enabling the digital euro to function as a cross-border payment tool. In contrast to the digital euro project, the Pontes and Appia projects might have a more significant external dimension.

While intra-EU wholesale transactions are almost entirely settled in euros, cross-border and cross-currency settlements to and from the EU borders are still, for a significant portion, processed in US dollars, thereby going through the US financial infrastructure. With this in mind, the development of a wCBDC has the ambition to “include international operations, such as foreign exchange settlement.” In line with this ambition, the Eurosystem launched an experiment, Project Meridian,[20] in cooperation with the BIS and the Bank of England to connect the three pilot projects with a synthetic version of the UK RTGS system to test interoperability for FX transactions via the three systems. This initiative signals an emergent ambition: to leverage its exploratory work to exert global influence on the euro as an international currency.

Another dimension of the ambition to influence is shaping global standards and technological leadership. In this case, the TARGET Instant Payment Settlement (TIPS) system offers a model for leveraging euro-denominated infrastructure to exert monetary influence. Access to TIPS has been extended to non-euro area countries, including Sweden (since 2022), Denmark (planned for 2025), Norway (in progress), and Iceland (interested), marking a notable expansion beyond the monetary union. By joining TIPS, these countries adopt ECB-defined standards and institutional frameworks within their domestic systems. The ECB is also considering enabling direct currency conversion between the euro and the Swedish krona within TIPS, a shift from the current single-currency settlement model.

Beyond Europe, the ECB has exported cloned versions of TIPS technology to central banks in Montenegro, Kosovo, North Macedonia, and Bosnia and Herzegovina, following a similar earlier request from Albania. These initiatives allow countries to replicate ECB infrastructure independently. Finally, the ECB has recently announced the interlinkage between TIPS and global fast payment systems, such as India’s UPI.[21] The design of the digital euro has been shaped by the TIPS experience, with built-in features that enable multi-currency use and potential export to non-Eurozone jurisdictions. While this opens the door for broader integration or replication, such ambitions remain largely technical. Without deeper legal, regulatory, and institutional alignment, these efforts are expected to have only a marginal impact—supporting limited euro internationalization regionally but not significantly enhancing the EU’s global monetary power.

The development of wCBDC also speaks to the EU’s ambition to play a leading role in shaping the future architecture of global financial infrastructure. As tokenized finance expands, the question of who will design and govern the settlement rails for digital assets has become central to the future distribution of monetary power. The launch of Pontes and Appia does not simply extend experimentation or mitigate technical risks; it represents a deliberate move to ensure that the EU is not a passive recipient of global CBDC standards but an active contributor to their definition. Pontes provides a credible and immediate solution for settling tokenized transactions in central bank money, demonstrating the Eurosystem’s ability to offer a public sector alternative to privately issued settlement assets, including US-denominated stablecoins.

In doing so, it ensures that Europe remains relevant in the evolving market for tokenized securities and smart contract-based payment flows. Appia, by contrast, articulates a longer-term strategic ambition. Rather than adapting existing infrastructures to new digital environments, Appia aims to design a DLT-native wholesale settlement architecture that is governed by European institutional, regulatory, and political principles. If realized, such an ecosystem could support cross-border settlement without depending on dollar-clearing channels such as correspondent banking or SWIFT-based messaging frameworks, thereby expanding the EU’s capacity to shape global settlement norms.

Conclusion

The ECB’s initiatives on the digital euro and wholesale CBDCs show that Europe has begun to understand a crucial reality: the future of monetary power will be decided not only in balance sheets but in infrastructures. Control over the technological rails through which settlement occurs—and the institutional rules they embed—will increasingly define who retains autonomy and who sets standards in the emerging monetary order.

The retail digital euro project serves as a strategic hedge against the existing and future risks associated with dependency on foreign providers. Even if widespread consumer adoption does not materialize immediately, its existence provides Europe with a public, resilient alternative that can be mobilized if foreign intermediaries—whether commercial networks or dollar-based stablecoin systems—become a channel of coercion or disruption. At the same time, the wholesale CBDC track opens the possibility of projecting European influence outward. With Pontes and Appia, the ECB is positioning the Eurosystem to participate in—and shape—the global architecture of tokenized settlement.

These initiatives cannot fundamentally alter the structural constraints of the euro’s global role, but they may enable Europe to avoid subordination to private or extra-European infrastructures as tokenized finance expands. They represent Europe’s attempt to retain space for strategic choice in its connections to the world. Taken together, the two CBDC initiatives show a shift in Europe’s strategic mindset. Rather than continuing to adapt to a system largely shaped by others, the EU seeks to influence the rules of the game—even if gradually, and even if from a structurally asymmetric position.

In a world where financial interdependence can be weaponized and infrastructure is becoming a geopolitical tool, presence matters. By advancing both retail and wholesale CBDC tracks, the EU is ensuring its presence at the negotiating tables where the foundations of the next monetary era are being established.

[1] Nicola Bilotta, Coordinator, EU-SDFA, and Senior Research Associate, Florence School of Banking and Finance (European University Institute).

[2] European Commission, The Future of European Competitiveness: A Competitiveness Strategy for Europe (Luxembourg: Publications Office of the European Union, 2025), PDF, ISBN 978-92-68-22715-2, https://commission.europa.eu/document/download/97e481fd-2dc3-412d-be4c-f152a8232961_en.

[3] Maria Demertzis, “Europe’s Financial Independence Needs Derisking, Not Decoupling,” The Conference Board, September 22, 2025, https://www.conference-board.org/publications/Europes-Financial-Independence-Needs-Derisking-Not-Decoupling.

[4] European Central Bank, The International Role of the Euro (Frankfurt: European Central Bank, 1999), 15.

[5] European Commission, Towards a Stronger International Role of the Euro (Brussels: European Commission, 2018).

[6] European Central Bank, The Eurosystem’s Retail Payments Strategy: Priorities for 2024 and Beyond (Frankfurt: European Central Bank, November 2023), https://www.ecb.europa.eu/pub/pdf/other/ecb.eurosystemretailpaymentsstrategy~5a74eb9ac1.en.pdf.

[7] European Systemic Risk Board, Crypto-assets and Decentralised Finance: Report on Stablecoins, Crypto-investment Products and Multi-function Groups (Frankfurt: European Systemic Risk Board, October 2025), PDF, https://www.esrb.europa.eu/pub/pdf/reports/esrb.report202510_cryptoassets.en.pdf.

[8] Benjamin J. Cohen, “Currency and State Power,” in Power in Global Governance, ed. Michael Barnett and Raymond Duvall (Cambridge: Cambridge University Press, 2005), 161–86.

[9] European Central Bank, “Digital Euro,” accessed [add access date if required], https://www.ecb.europa.eu/euro/digital_euro/html/index.en.html.

[10] European Central Bank, “Exploratory Work on Distributed Ledger Technology (DLT),” accessed [add access date if required], https://www.ecb.europa.eu/paym/dlt/exploratory/html/index.en.html.

[11] European Central Bank, “Digital Payments Continue to Rise, Albeit at a Slower Pace; Cash Remains a Key Payment Method,” press release, December 19, 2024.

[12] Henry Farrell and Abraham L. Newman, “Weaponized Interdependence: How Global Economic Networks Shape State Coercion,” International Security 44, no. 1 (Summer 2019): 42–79, https://doi.org/10.1162/ISEC_a_00351.

[13] European Central Bank, “Most EU Countries Rely on International Card Schemes for Card Payments, ECB Report Shows,” press release, February 28, 2025, https://www.ecb.europa.eu/press/pr/date/2025/html/ecb.pr250228_1~7f0697af45.en.html.

[14] European Systemic Risk Board, Crypto-assets and Decentralised Finance (see note 7).

[15] Barry Eichengreen, Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System (New York: Oxford University Press, 2011).

[16] Eric Helleiner, The Making of National Money: Territorial Currencies in Historical Perspective (Ithaca, NY: Cornell University Press, 2003).

[17] Maria Demertzis and Josh Lipsky, “The Geopolitics of Central Bank Digital Currencies,” Intereconomics 58, no. 4 (2023): 173–77, https://doi.org/10.2478/ie-2023-0037.

[18] European Central Bank, “Introductory Statement by Fabio Panetta at the ECON Committee of the European Parliament,” speech, December 10, 2020.

[19] European Central Bank, “Modernising Finance: The Role of Central Bank Money,” keynote speech by Piero Cipollone at the 30th Annual Congress of Financial Market Professionals, Genoa, February 9, 2024.

[20] Bank for International Settlements, “Nexus: Connecting Fast Payment Systems,” accessed [add access date if required], https://www.bis.org/about/bisih/topics/fmis/nexus.htm.

[21] European Central Bank, TARGET Instant Payment Settlement (TIPS): Connecting to Other Fast Payment Systems (Frankfurt: European Central Bank, October 21, 2024), PDF, https://www.ecb.europa.eu/home/doc/ecb.doc241021_TIPS_to_connect_to_other_fast_payment_systems.en.pdf.