The Digital Euro at the Nexus of Payments Sovereignty, Consumer Adoption and Bank Intermediation: Design Requirements and Banking-Sector Implications of a Retail CBDC in the Euro Area

The digital euro is intended to preserve access to public central bank money in an increasingly digital payments landscape while strengthening European payments sovereignty. Its potential success, however, will not depend on institutional legitimacy alone. The decisive question is whether it can offer consumers a discernible advantage over established payment instruments and be embedded in a viable intermediated model. This working paper therefore examines the design requirements under which a digital euro could generate tangible everyday utility while preserving the intermediation role of commercial banks. Methodologically, the analysis draws on recent primary sources issued by European institutions and central banks, relevant academic literature and selected international CBDC case studies. The findings indicate that user-friendliness, privacy, online and offline functionality, a sufficiently broad acceptance network and robust integration into existing payment infrastructures are particularly important. At the same time, the digital euro gives rise to tensions between attractiveness and financial stability, privacy and regulatory traceability, and public infrastructure and private-sector innovation. Holding limits, waterfall and reverse-waterfall mechanisms, and an appropriately calibrated remuneration model may help to mitigate these tensions. The digital euro can therefore contribute to European payments sovereignty, provided that it is designed as a user-oriented public infrastructure and underpinned by the functional and economically viable involvement of commercial banks.