How Much Will the Digital Euro Cost?
Introducing the digital euro could cost European banks between €4 billion and €6 billion over four years, European Central Bank Governing Council member Piero Cipollone said on Thursday. The estimate is based on indications received from banks and covers implementation expenses linked to integrating the new digital currency into existing systems.
“Estimates we’ve come up with based on indications we received from banks point to implementation costs of between 4 and 6 billion euros over four years: that is about 3% of what they spend every year on IT-system maintenance,” Cipollone said while speaking to an Italian parliamentary committee on banks.
The ECB itself expects to spend around €1.3 billion to set up the digital euro infrastructure. Once operational, annual running costs are projected at about €300 million.
Investor Takeaway
What Is the ECB Building?
The ECB is working with private contractors to develop the infrastructure for a digital-only version of the euro. Under the proposed framework, euro area residents would hold digital euro accounts with the central bank, accessed through applications provided by commercial banks.
Banks would distribute the smartphone applications required to use digital euros for payments. They would also interface with merchants and consumers, effectively acting as the operational layer between users and the ECB’s core system.
European Union citizens outside the euro zone would also be able to use digital euros if their national central bank reaches an agreement with the ECB, Cipollone said.
How Will Banks and Merchants Be Paid?
Cipollone said banks would be able to recover their implementation costs through fees charged to merchants for digital euro services. At the same time, the ECB would not charge banks for using its settlement network, removing a cost component typically associated with private payment schemes.
Banks would therefore not need to deduct from merchant fees the amounts normally paid to private payments networks for processing services, he added. Merchants, in turn, are expected to benefit from capped fees on digital euro transactions.
Those caps would be set below current charges imposed by international card networks such as Mastercard and Visa, potentially lowering acceptance costs for retailers.
Investor Takeaway
Why Is the ECB Pushing Ahead?
The ECB is awaiting European Union legislation that would authorize issuance of the digital euro. Policymakers view the project as a way to keep central bank money relevant in an increasingly digital economy and to address fragmentation across Europe’s payments systems.
Officials have also argued that a digital euro would reduce dependence on non-EU payment providers, reinforcing monetary sovereignty and economic security within the bloc.
The central bank is selecting lenders to participate in a pilot phase ahead of a planned launch in 2029. If approved by lawmakers, the digital euro would add a publicly issued digital payment option alongside cash and existing electronic banking channels.