European Central Bank (ECB) President Christine Lagarde gave the world an update on the digital euro central bank digital currency (CBDC) last week, saying the deadline for the preparation phase is now October 2025.
Speaking at a press conference on Friday, March 7, Lagarde said the team behind the digital euro was “focused on accelerating the pace,” highlighting how they are campaigning to get other stakeholders like the EU Parliament and European Commission on board.
The ECB President said the digital euro was “critically important” and was more of an imperative now than previously. However, she noted that the digital euro could not be launched without the proper legislation being passed.
The digital euro investigation phase was completed in October 2023 and is now in its preparation phase. The next phase will be the decision phase, after which it will either be implemented or discarded.
Why is the digital euro more important than ever?
Lagarde’s statement that the digital euro is more important than ever, even to its skeptics, hints that the decision will likely be positive and that the euro CBDC will become a reality. But why the accelerated timeline, and why are agnostics and skeptics beginning to view it as imperative? The answer is likely the seismic changes across the Atlantic in Washington, D.C.
Since President Donald Trump was elected in November and given his clear signal that the United States is no longer willing to underwrite European security, the continent’s leaders have come together and concentrated on solutions in unprecedented ways.
While the EU’s strategy on how to deal with an isolationist United States, whose President views it as a “foe of sorts,” will be multi-pronged, the decisions will all be guided by a policy known as Strategic Autonomy, ensuring the European continent can thrive without the United States.
One of the elements of Strategic Autonomy is financial and economic independence. In light of protectionist trade tariffs out of Washington, the EU will want to reduce its reliance on the U.S. Dollar and, hence, its exposure to U.S. monetary policy and sanctions. The digital euro would strengthen the euro’s international role and further its position as a reserve currency, not to mention giving Europe an alternative should Trump or a future U.S. leader place sanctions on the EU or any of its member states.
The digital euro offers upsides for payments, too. Europe’s payment system is notoriously fragmented, and while SEPA and the introduction of various fintech platforms have made it more efficient, there’s still vast room for improvement. A widely accepted digital euro would facilitate smoother trade on the continent while reducing reliance on American and Chinese payment processing firms like Visa (NASDAQ: V), Mastercard (NASDAQ: MA), and Alipay.
Of course, retail payments are only half of the story. In light of the stark realization that Uncle Sam will no longer guarantee Europe’s defence against Russia, the EU has vowed to spend €800 billion ($868 billion) on defense, with some individual states like Germany vowing to spend additional tens or hundreds of billions. A unified digital payment system would mean more efficient payments and better-coordinated fiscal policies in crises.
In short, the digital euro will help with Europe’s goal of strategic autonomy: faster, more efficient payments; a way to avoid sanctions from U.S.-dominated systems like SWIFT and less reliance on payment processors based in potentially hostile states.
America’s desire to increase the dollar’s dominance
Interestingly, President Trump’s rhetoric has pushed the EU toward a trend he wanted to avoid. De-dollarization is already the stated goal of the BRICS alliance, and now the EU will be looking for ways to reduce its exposure to the USD and, if not outright, to ditch it.
Yet, President Trump has clearly stated he will not sit back and watch BRICS de-dollarize, saying they must make a commitment or face 100% tariffs.
This desire to bolster dollar dominance is at the heart of the Trump administration’s stablecoin push. They see dollar-backed stablecoins as a way to keep the USD dominant and increase its use in trade worldwide.
“We are going to keep the U.S. the dominant reserve currency, and we will use stablecoins to do it.” – U.S. Treasury Secretary Scott Bessent, White House Crypto Summit, March 2025.
With the two U.S. stablecoin bills moving through the legislative process, we’ll soon know exactly what shape the new rules will take. Whichever becomes law, it’s clear that the current government favors private stablecoin issuers and is dead against a U.S. CBDC.
So, here we have an American government that is against any move away from the U.S. Dollar but is driving nations to look for alternatives precisely because of his rhetoric and trade policies. While there could be some 5D chess at play, it’s more likely that conflicting goals are causing some blind spots.
In any case, the digital euro is now more likely to become a reality. If the EU achieves Strategic Autonomy, adopts common fiscal policies and begins issuing bonds at scale, or any combination of the above, the euro could become a more serious rival to the USD in the decades to come. Then again, perhaps the EU will decide not to proceed with the digital euro: we only have to wait until October to find out!
Watch: Finding ways to use CBDC outside of digital currencies
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