ECB Pursues Digital Euro and Pontes for Central Bank Money

The European Central Bank is pursuing a unified strategy to extend central bank money into retail payments and wholesale tokenized finance through the proposed digital euro and Pontes, expanding public-money infrastructure for payments and tokenized finance.

The digital euro has not been approved or issued. If European Union legislation is completed by the end of 2026, the ECB aims to be ready for a potential first issuance in 2029, subject to a later decision by its Governing Council.

The proposed currency would support person-to-person payments, e-commerce and in-store purchases both online and offline. Banks and other regulated payment-service providers would distribute it and manage customer relationships, while the ECB would not provide customer-facing services.

“The digital euro is being designed as a means of payment, not an investment product,” Executive Board member Piero Cipollone said in a speech delivered Oct. 6 in Frankfurt.

The digital euro would not pay interest, and individual holdings would be limited. Analytical scenarios covering limits from €500 to €3,000 across 2,025 banks estimated that digital-euro holdings could increase bank deposits by €127 billion by 2034. That would equal 0.4% of banking-sector assets or 1.5% of retail sight deposits. The figures are illustrative and do not establish a final holding limit.

The digital-euro pilot is planned for the second half of 2027 and is expected to run for 12 months. Thirty-six payment-service providers were selected from more than 50 applicants.

The ECB’s retail plan is paired with Pontes, the wholesale application. The Eurosystem launched Pontes on Sept. 21 to connect distributed ledger technology platforms with Eurosystem services for banks, market infrastructures, issuers and investors. Full implementation is expected by 2028, with 24/7 service, greater programmability, enhanced resilience and multi-currency capability targeted for mid-2028.

“Pontes brings the stability and trust of central bank money to the European tokenised finance ecosystem,” Cipollone said.

The strategy reflects Europe’s effort to preserve a common settlement asset as commercial-bank money, tokenized deposits and other regulated assets move across digital networks. Two-thirds of euro-area card payments rely on international card schemes, while 13 of 21 euro-area countries have no domestic card scheme. Cross-border transactions represent 5% of the European payment market.

Appia is the longer-term infrastructure initiative. It covers asset interoperability, collateral management, tokenized central bank money, cross-border transactions, resilience and legal frameworks. The ECB aims to deliver an Appia blueprint in 2028 after a public consultation that received 127 responses; 90% of respondents made at least one proposal. Its market contact group includes 61 entities selected from more than 100 applicants.

The ECB’s next major milestones are the planned 2027 pilot and the legislative deadline tied to a potential 2029 issuance.