How the Digital Euro Works

Technology, infrastructure, and distribution.

The digital euro is designed to work seamlessly alongside existing payment methods. Understanding its architecture helps clarify how it will function in everyday life.

The Distribution Model

The digital euro would use a two-tier distribution system:

Tier 1 — ECB to intermediaries: The ECB issues digital euros to commercial banks and other licensed payment service providers (PSPs). The ECB manages the infrastructure and oversees the system.
Tier 2 — Intermediaries to users: Commercial banks and PSPs provide digital euro accounts and wallets to citizens and businesses. They handle customer onboarding, KYC checks, and user-facing services.

This model leverages the existing banking infrastructure while keeping the central bank at the core. It means your bank or a public intermediary would set up your digital euro account — you wouldn't interact with the ECB directly.

Online and Offline Payments

The digital euro is being designed to support both online and offline payments:

Online payments: For internet purchases, bill payments, and transfers. These require authentication through your bank or PSP.
Offline payments: For in-store purchases and person-to-person transfers using a phone or card. These work without internet connectivity, similar to exchanging physical cash.

Offline payments would use secure hardware on your device, allowing transactions even when both parties are disconnected from the network.

How You Would Access It

Citizens would access the digital euro through:

A digital euro app provided by your bank or a public intermediary
A physical card linked to your digital euro account
Integration into existing banking apps

Holding Limits

To prevent large-scale deposit migration from commercial banks (which could destabilise the financial system), the ECB has proposed holding limits on digital euro accounts. Current proposals suggest a limit of around €3,000–€5,000 per individual, though the exact figure is still under discussion.

The digital euro would also carry zero remuneration — it would not earn interest, making it a payment tool rather than a savings vehicle.

The Technical Infrastructure

The ECB is exploring a range of technical solutions:

Settlement infrastructure: A dedicated platform to process and settle digital euro transactions.
Distributed Ledger Technology (DLT): The ECB is investigating DLT-based components, including the "Pontes" initiative for interoperable European DLT infrastructure.
Programmable payments: Smart contract functionality for automated payments, conditional transfers, and escrow services.

The Pilot Programme

The ECB has invited payment service providers to participate in a 12-month pilot programme starting in the second half of 2027. Over 50 institutions applied, with selections announced in July 2026. The pilot will test:

User experience and payment flows
Integration with existing banking infrastructure
Offline payment functionality
Cross-border payments within the eurozone
Merchant acceptance and settlement

The digital euro is not about replacing what works — it's about adding a European option to the digital payments landscape.