The digital euro is a proposed electronic form of currency issued by the European Central Bank (ECB) that would serve as a digital counterpart to the physical euro notes and coins. Unlike cryptocurrencies, which are decentralized and typically not backed by a government, the digital euro would be a central bank digital currency (CBDC), fully regulated and legal tender, meaning it must be accepted as a form of payment

The digital euro could offer all groups in society quick and convenient access to a digital means of payment, even for the less ‘digitally native’. Offline usability would also make sense

Burkhard Balz, member of the executive board of Deutsche Bundesbank

In Simpler Terms

Consider a typical day when you’re out shopping for groceries and other essentials. Instead of carrying cash or cards, you simply tap your smartphone or a wearable device at checkout to pay using digital euros. Ok, but how is that different from the money you have on your credit card?

Well, the digital euro is a central bank digital currency (CBDC) issued directly by the European Central Bank (ECB), equivalent to euro banknotes or coins but in digital form. The electronic euros in your bank account are a form of commercial bank money. They are created and managed by private banks, not directly by the central bank.

The value and stability of electronic euros in a bank account are subject to the financial health and stability of the respective commercial bank. In contrast, the digital euro’s value is as stable as the physical euro because it is directly tied to the central bank.

Also, electronic funds in bank accounts are widely accepted for transactions but are technically not legal tender. Retailers and businesses may choose to accept or decline these forms of payment at their discretion. The digital euro is intended to be universally accessible, ensuring everyone, including those without bank accounts, can use it. This inclusivity promotes financial integration across all societal segments.