Op-Ed on the digital euro in the making
by Mario Martínez Lorenzo
Presidente Dinero Positivo España, Santiago de Compostela, June 2026
Even though the digital euro in its currently planned form may not yet represent sovereign money in the full sense, the project is worth supporting because it can be a starting point towards European monetary sovereignty and a sovereign money system over time.
One of the key points is that some initial reforms can be implemented without changing the EU Treaties or facing as much contestation as proposals to engage in direct public financing. While a full sovereign money system (that would render commercial bank money a risky option without systemic risk or public backstops) would ultimately require treaty change and a different mechanism for issuing digital euros, even the slightest opening of the banks' privileged access to central bank money is a big win.
As currently designed, the digital euro would allow citizens to hold only a limited amount of central bank money directly, via intermediaries such as banks and other payment service providers. This is important because, until now, ordinary people could only access central bank liabilities through physical cash, while electronic money almost entirely remained commercial bank money (electronic money entities could already ask national central banks for permission to do so). Almost all money in circulation, be it public or private, and including cash, has a debt counterpart somewhere else within the banking system, with the sole exception of asset purchases allowed to remain on bank balance sheets.
The key structural implication of a CBDC as currently being discussed in the EU is that people would be able to move part of their money out of commercial bank deposits and into direct claims on the ECB. That slightly reduces banks’ ability to rely on deposit creation and fractional-reserve banking dynamics. But most importantly it also creates public awareness that central bank money and commercial bank money are fundamentally different things.
At the moment, however, there are strict proposed holding limits. Banks have argued for limits as low as €500, while others advocate around €10,000. The current discussion centres on around €3,000 per person. Moreover, only natural persons — not firms or institutions — would be allowed to hold digital euros directly. All this aims to prevent a bank run that reduces liquidity with banks, but let’s not forget that at the same time excess reserves have caused record profits for private banks and at the same time record losses for central banks, so it would be a good way to end this problem. People will start asking themselves why they can’t hold more of this safe and convenient type of money.
Another important point is that the current design still keeps the banking sector deeply integrated into the system. Digital euros would remain fully interchangeable 1:1 with bank deposits, the sole originators of new money in the system. Payments could automatically draw funds from linked commercial bank accounts when necessary (waterfall mechanism), or payments received in digital euros that exceed the holding limit would automatically be converted back into bank deposits (reverse waterfall). So, the digital euro, rather than supersede bank money, will remain tied to it (with one caveat: countries will probably be forced to provide at least one public intermediary that offers something like a bank account to everyone, not to force consumers to deal with private sector intermediaries to access a public utility like the digital euro).
Although banks would act both as the main providers of digital euros and payment services, they would not have direct control over the digital euros, because – under current accounting practices – digital euros would remain liabilities of the central bank, while banks must fully refinance every digital euro they disburse to customers, similar to paying out physical cash.
In practice, this means the digital euro could become a meaningful public alternative to bank money, even if initially limited, expanding the disciplining effect of physical cash with a much convenient form. It is being negotiated how holding limits could be changed in the future by the European Council, representing all euro member states.
The political importance is that the sole discussion about instability is helping politicians and lawmakers to recognize the true source of the fragility (bank business models) and contradictions of the current system, where nearly all money in public circulation is privately created through bank lending, but backstopped by national central banks and governments, including the European Council and the EU Parliament.
In my opinion, the current holding limits are the wrong solution to not really well-founded concerns about bank liquidity and financial stability. A better approach would be to allow broader public access to central bank money from day one while providing liquidity facilities or transitional refinancing mechanisms for banks when necessary, instead of restricting citizens’ access to sovereign money. Otherwise we lose most of the potential benefits of this reform.
While great arguments in favour of a free public payment system that prevents foreign coercion and oligopolies, as those US card companies have today, or big tech in other sectors, by granting interoperability and democratic oversight, most potential is still unrecognized. As long as we are not able to have all our money in a public form, the case for protecting bank deposits remains. But to the extent that holding limits are eased and access to digital euros becomes widespread, there would be no more rationale to keep all the protections private fractional-reserve banking enjoys today. We would then move into a system where private money still exists but its risks are fully borne by those who choose to use it, while a public free and safe alternative is always there.
A further key move in terms of monetary policy would be to allow a way for increasing the money supply that wouldn't depend on incurring debts; a goal certainly harder to achieve.
Finally, regarding background reading, I would strongly recommend
· The Discussion Paper Restructuring Europe's Monetary and Financial Architecture, April 2026, by Martijn van der Linden, professor of New Finance at The Hague University, NL
· Finance Watch: The Digital Euro for Everyone: What It Changes and What It Doesn't, which summarizes the current design discussions quite clearly, as well as
· WeMove Europe: Petition on the digital euro.