The Euro doesn’t only come from the central bank — a plea for a more holistic view of the term “Digital Euro”

Philipp Sandner
6 min readJan 16, 2022


The “digital euro” is on everyone’s lips. In the past year, one could increasingly read about the digitization of money in the media — especially about the global development of so-called “Central Bank Digital Currencies” (CBDCs). Media representatives and industry representatives have high expectations of central banks. For example, the new type of money is supposed to not only digitize payment processes and enable programmable transactions using the promising blockchain technology, but at the same time be as anonymous and flexible as cash. But does this correspond to a realistic expectation? We recommend thinking more broadly about the term “digital euro” and including initiatives from the private sector in the discussion. After all, as in the current set-up of the monetary system, private forms of money will most likely continue to enable most transactions in the economy and society — especially innovative forms of payment using blockchain technology.—Authors: Manuel Klein, Philipp Sandner

The year 2021 can undoubtedly be assessed as the year of CBDCs from a media perspective: The first solutions went live abroad, the Chinese e-Yuan was intensively tested, and the ECB announced it will study the possible introduction of a CBDC. However, central banks are not primarily concerned with whether blockchain technology is used when developing CBDCs. Rather, the question is whether physical banknotes and euro coins, as well as commercial banks’ digital money, should be supplemented by a digital euro by the central bank at all. It is to be expected that this decision will only be taken if it is ensured that large outflows of funds from bank accounts to digital cash from the central bank are prevented. If this were to happen, it is feared that banks would have to refinance themselves on a longer-term basis and thus more expensively, which could cause lending rates to rise and therefore hamper lending and money creation.

However, limiting the amount of CBDCs per citizen also means that the main type of money in today’s economy — commercial bank money — cannot be replaced by CBDCs. In this respect, it is necessary to find solutions on how to transfer commercial bank money or other private money types via the Blockchain in order to serve requirements from corporates and to digitize payment processes more efficiently.

One highly discussed form of digital money is the so-called “stablecoins,” whose circulating amount increased by about 450% to ~$165 billion in 2021. While most stablecoins are currently used for trading cryptocurrencies or in blockchain-based “decentralized finance”, some providers are already working intensively on use cases in the real economy. Facebook, for example, is already enabling free cross-border transactions to Guatemala as part of a pilot project with its payment app Novi and the Paxos stablecoin.

In addition to stablecoins, which will be regulated as e-money in Europe in the future, proposals from national and international commercial banks on how bank deposits could be transferred via blockchain systems are increasingly being discussed. In June 2021, for example, a report was published by the German banking industry that outlined three different ways in which such a “commercial bank money token” could be structured. Some international commercial banks and technology companies are already working on similar concepts focusing on blockchain-based payment and settlement platforms for tokenized commercial bank money.

As is the case today, there will be different versions and forms of the euro in the future: ECB-based forms of the digital euro could cover certain applications that the private sector does not — for example, payments with high privacy, anonymity, or offline functionality. Private forms of the digital euro will likely continue to provide the bulk of the money and enable innovative payment applications. It is reasonable to assume that commercial bank money will also be rivaled by stablecoins in the future, and thus e-money will assume increasing importance in the economy.

But why does the financial and real economy need blockchain-based digital fiat currencies anyway? In addition to more efficient and fully digitized payment transactions between end users, initial projects have successfully tested the new technology in automated order confirmation, invoicing and payments by linking ERP systems via the blockchain. According to the companies involved, the efficiency gains were enormous, not only in eliminating manual payment triggers or matching invoices and incoming payments, but also in liquidity management and working capital management. In the financial sector, more efficient cross-border and cross-currency payments as well as payment-vs-payment (PvP) or payment-vs-delivery (DvP) are among others expected to be facilitated more efficiently using blockchain-payments.

So-called trigger solutions represent a promising, readily available way to exploit the advantages of blockchain technology without using a tokenized form of the Euro. These can represent an essential intermediate step in the necessary linkage between blockchains and payment transactions via the existing payment systems. However, in the future, tokenized commercial bank money or stablecoins may enable other use cases that are not possible with trigger solutions. These include, for example, payments between machines in the Internet of Things or micropayments. Whether the European central bank’s digital euro will serve all these industry requirements with its own solutions will be seen when the results of the ECB’s Investigations project and the decisions on the design of a potential digital Euro are published.


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Manuel Klein is Product Manager for Blockchain Solutions & Digital Currencies at Deutsche Bank. He is also founding member of the Digital Euro Association (DEA). Before working at Deutsche Bank, He was a senior Consultant for Blockchain Technology at EY.

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).



Philipp Sandner

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