ECB’s Lane: Digital Euro Needed to Safeguard Retail Role of Central Bank Money

29 August 2025

By David Barwick – FRANKFURT (Econostream) – European Central Bank Chief Economist Philip Lane has argued that the digital euro was essential to preserving the role of central bank money in retail transactions as the monetary system adapts to digitalisation.

In an opinion piece for the September issue of the IMF’s Finance & Development (F&D) Magazine on “Stablecoins and the Future of Finance”, Lane said that the project’s “simple motivation” was to ensure that in a digital world people retained the option of making or receiving payments in central bank money.

“Supplementing physical cash with digital cash will support the modernization of the traditional two-tier monetary system,” he wrote. “Prudence suggests that the retail role should be preserved, including through the introduction of a digital euro.”

A digital euro would minimize risks to monetary stability, ensure convertibility of commercial bank money, and protect the system from potential dominance of private payment networks, Lane said.

Public access to central bank money limited monopoly power in payments and provided a fallback in the event of disruptions, he argued, adding that “this is one reason policymakers want a digital euro to work offline as well as online.”

Stablecoins were not a substitute for central bank money, Lane wrote, since their stability was not intrinsic. By contrast, a digital euro “promises to modernize the two-tier monetary system without destabilizing financial institutions or disrupting monetary policy implementation or transmission.”

Appropriately calibrated holding limits would prevent excessive outflows from banks, and privacy would be maintained if commercial intermediaries performed know-your-customer checks, he said.

Lane highlighted additional advantages for the euro area, including overcoming the fragmentation of national payment systems and reducing reliance on non-European providers. “By mandating acceptance of a digital euro, instant network effects would help unify the currently fragmented market,” he wrote.

A digital euro would also reduce merchant costs, strengthen bargaining power versus international card networks, and foster fintech innovation on a pan-European platform, he said.

“To sum up, a retail role for central bank money is arguably integral to the sovereign foundations of the monetary system,” Lane concluded. “Beyond its economic and monetary roles, the euro is an important symbol of European unity. This must be maintained in a digital age.”