The digital euro from a geopolitical perspective: Will Europe lag behind?

This paper contains 24 pages and can be downloaded here with the direct link to the PDF file with 350 kB.

1. Introduction

Digital euro as a generic term, not specific to ECB projects. The digital euro is not limited to a single technical platform or infrastructure. Rather, the term “digital euro” describes a variety of solutions that are based on different technologies and that can be used for different needs in different application domains for different use cases. Thus, it is necessary to consider different application domains: the digital euro for individuals, commerce, businesses, industry, the capital market, and international transactions. At the same time, different entities can issue the digital euro: the European Central Bank (ECB) in the form of a central bank digital currency (CBDC), commercial banks via a trigger solution, or (un)regulated firms from the financial sector in the form of euro stablecoins.

2. Progressive digitization of the monetary system

Money is becoming increasingly digital, and cash is being more and more displaced. Overall, a clear trend can be observed: Money is becoming increasingly digital. While digital money has already existed for decades in the form of bank deposits, which are sent, for example, when payments are made via credit cards, mobile payments, or bank transfers, the importance of physical cash as a means of payment is declining steadily — an ongoing trend that is accelerated by the Covid-19 pandemic. To counteract this trend, central banks are currently considering introducing “digital cash” in the form of CBDCs (Boar & Wehrli, 2021). On the other hand, banks, associations, and industrial companies also work on innovative and new variants of the “digital euro”, for example, based on novel technological infrastructures, such as blockchains. Similar developments can also be observed in other currency areas, such as the U.S. or China, with steadily growing momentum.

3. The geopolitical significance of money

US dollar as the world’s reserve currency in 2021. Money also has an immense geopolitical component because the dispersion and worldwide acceptance of a currency impacts the monetary power worldwide. Today, the US dollar enjoys undisputed status as the world’s reserve currency — the US dollar symbolizes trust and stability. It is used globally as a “benchmark currency” for payments and loans. For example, according to the ECB, approximately 60% of global debt and 55% of global loans are currently denominated in US dollars (ECB, 2021c). The emerging field of DeFi, which maps functions of the financial system entirely through decentralized computer programs (i.e., smart contracts), also mainly uses the US dollar as its reference currency (Eikmanns et al., 2021). However, the US dollar has gained this prominent role just in the last century. Prior to that, France, Spain, and the United Kingdom, among others, provided the world reserve currency at various points in history. Accordingly, history shows that the dominance or position of a currency can change over time — even if it is a slow process.

4. Monetary innovation around blockchain technology.

Potential behind nanopayments and streaming money. Such novel digital payment options are also highly relevant for businesses in the industry and the financial sector. Blockchain technology promises to drive the digitalization and automation of business models. It also enables novel use cases, for which a blockchain-based, digital money — preferably, a blockchain-based euro — is necessary (FinTech Council at the German Ministry of Finance, 2020). These use cases include, for example, nanopayments, i.e., sub-cent payments or streaming money use cases, where payments are not made discretionarily but steadily based on actual usage. Neither class of use cases can be efficiently implemented with money that exists today. One example of how nanopayments and streaming money can be combined is the usage-based “consumption” of online articles or music streaming. Here, the customer would be charged according to his or her actual usage, i.e., pay for every second he or she reads the article or streams music. Such offers increase the interest of users who seek to access the offer only for a short time or only want to use isolated parts of the source of content. These customers currently shy away from an investment because they cannot — or do not want to — economically justify the acquisition of the entire content. Nanopayments and streaming money applications would also enable novel use cases in businesses, e.g., electricity consumption that can be broken down to individual devices in logistics or production networks. Other use cases include, for example, usage-based billing for all kinds of consumer goods that are not used regularly, for which payments in the sub-cent range are necessary (Sandner et al., 2021). Streaming money has significant potential, especially if the money used is sufficiently (efficiently) fractionated, and sub-cent payments are also possible. Only blockchain-based means of payment can currently achieve such levels of granularity.

5. Digital money solutions

Different ways of representing money digitally. There are different approaches as to how money can be represented digitally, i.e., how the euro could become “digitized”. This includes conventional payment solutions not based on blockchain technology, as well as innovative payment solutions that are based on blockchain technology (Bechtel et al., 2020). Figure 2 shows the different variations (including physical cash) and their application domains. It should be noted that not every solution by which money can be digitally represented can be used equally broadly. First, conventional types of money — digital and physical — will be described briefly.

6. Significant use of digital money solutions

Narrowed perspective of central and commercial banks. The previous section presented solutions for digital money, including blockchain-based money, and how they could be conceptually developed. However, there is no strategic timeline for the implementation of these solutions. Instead, they must be “developed” from the demand side and gain acceptance in the market. A purely theoretical presentation of the solutions from the (currently theoretical) supply side is not sufficient. It is necessary to consider (i) at which point in time which solutions may be ready from the supply side (e.g., China) and (ii) at which point in time which solutions may show or have significant demand from the demand side (e.g., US dollar stablecoins). A pure consideration of regulated solutions — developed by central banks or commercial banks — also ignores the fact that there are already US dollar-denominated stablecoin solutions that already show significant volumes, even though corresponding regulation has not yet been introduced. From the perspective of central banks and commercial banks, however, stablecoins are typically not recognized as serious alternatives, for example, for international payments, because they (still) lack regulatory clarity today — and consequently also the system-immanent requirement to identify the transaction parties. However, this should not obscure the facts and actual figures. Figure 3, therefore, shows the points in time (depending on the application domain) at which we expect a significant proportion of payment transactions to be processed with the corresponding digital money solution. Of course, this is a rough estimate and should be interpreted with caution.

7. The euro as a digital regional currency?

Future payment infrastructures in Europe. The euro is the medium for payments in a wide variety of application domains: individuals, commerce, business, industry, capital markets, international transactions. If we now study these fields and examine which variants of the digital euro could be used for each domain, we obtain interesting findings (see Figure 4).


The study contains 24 pages and can be downloaded here with the direct link to the PDF file with 350 kB.

  • Blockchain knowledge: We wrote a Medium article on how to acquire the necessary blockchain knowledge within a workload of 10 working days.
  • Our two blockchain books: We have edited two books on how blockchain will change our society (Amazon link) in general and everything related to finance (Amazon link) in particular. Both books are available in print and for Kindle — currently in German and soon in English. The authors have been more than 20 well-known blockchain experts in startups, corporations and the government from Germany, Austria, Switzerland and Liechtenstein — all contributing their expertise to these two books.
Our two books: the first one on blockchain and the society and the second one on blockchain and finance


Prof. Dr. Philipp Sandner has founded the Frankfurt School Blockchain Center (FSBC). From 2018 to 2021, he was ranked among the “top 30” economists by the Frankfurter Allgemeine Zeitung (FAZ), a major newspaper in Germany. He has been a member of the FinTech Council and the Digital Finance Forum of the Federal Ministry of Finance in Germany. He is also on the Board of Directors of FiveT Fintech Fund, 21e6 Capital and Blockchain Founders Group — companies active in venture capital financing for blockchain startups and crypto asset investment management. The expertise of Prof. Sandner includes crypto assets such as Bitcoin and Ethereum, decentralized finance (DeFi), the digital euro, tokenization of assets, and digital identity. You can contact him via mail ( via LinkedIn or follow him on Twitter (@philippsandner).

About the Frankfurt School Blockchain Center

The Frankfurt School Blockchain Center (FSBC) is a think tank and research center primarily focusing on the implications of blockchain technology for companies and businesses. In addition to the development of blockchain prototypes, the center offers a platform for the exchange of knowledge and thought for decision-makers and startups as well as technology and industry experts. The FSBC sets new research impulses and develops education programs for students and executives. The center concentrates primarily on the areas of banking, energy, mobility, and the manufacturing industry.

About the Digital Euro Association

The Digital Euro Association (DEA) is a think tank specializing in central bank digital currencies (CBDCs), stablecoins, crypto assets, and other forms of digital money. In particular, we focus on the digital euro. Our mission is to contribute to the public and political discourse through research, education, and by providing a platform and community for policy-makers, technologists, and economists to discuss digital money-related topics. We are committed to independence and excellence, aiming to set the agenda and to shape policy by encouraging new ideas and forward-thinking in the field of digital money. We target new and innovative topics such as the digital euro and Diem, but also “classical” crypto assets such as Bitcoin and Ether.


Auer, R., & Böhme, R. (2021). Central bank digital currency: The quest for minimally invasive technology. BIS Working Papers, 948.



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Philipp Sandner

Philipp Sandner


Professor | Lecturer | Author | Investor | Frankfurt School Blockchain Center