The Digital Euro Debate Is Stuck at the Wrong Level

Abstract

The debate surrounding the digital euro has become increasingly polarised. Advocates emphasise sovereignty, resilience and innovation, while critics warn of overreach, loss of market dynamics or programmable control over money. Yet much of this debate remains stuck at the wrong level.

This article argues that many of the controversies surrounding the digital euro are the result of a category error: products, standards, processes and settlement layers are routinely conflated, leading to misplaced comparisons and false trade-offs. As payments, treasury and financial processes move towards real-time and programmable execution, the question is no longer whether specific instruments should exist, but how the underlying financial architecture must evolve to support them safely and coherently.

Using a layered architectural perspective, the article situates the digital euro within a broader settlement context that includes instant payment infrastructures, central bank money, and emerging approaches to programmable finance. It positions CBDC not as a competing product, but as a potential component of a public settlement layer designed to provide finality, trust and interoperability.

The central thesis is that real-time and programmable finance cannot be sustainably achieved by optimising execution alone. Without a coherent settlement foundation anchored in central bank money, acceleration merely compresses risk. The article therefore calls for a shift in the debate. From ideology to architecture, and from isolated solutions to an integrated financial stack capable of supporting global trade.

Why the Digital Euro Debate Keeps Missing the Point

Few topics in contemporary payments provoke as much emotion as central bank digital currency. The digital euro, in particular, has become a lightning rod for broader concerns about sovereignty, competition, privacy and the role of the state in financial markets. Yet despite the intensity of the debate, progress in understanding remains limited.

A recurring pattern can be observed. Discussions oscillate between comparing the digital euro to existing payment products, questioning its programmability, or framing it as a public competitor to private solutions. These arguments often talk past each other, not because they are ill-intentioned, but because they operate on different, and frequently incompatible, levels of abstraction.

At the same time, the financial system itself is undergoing a structural transformation. Payments, treasury operations and liquidity management are increasingly executed in real time. Decision-making is shifting from manual intervention to rule-based and automated processes. What was once episodic is becoming continuous; what was once sequential is becoming event-driven.

In this environment, architectural questions move from the background to the foreground. Settlement finality, legal certainty, interoperability and access to risk-free money become not technical details, but foundational design choices. Treating these questions as secondary, or reducing them to ideological positions, risks obscuring what is actually at stake.

This article therefore takes a step back. Rather than asking whether the digital euro is desirable or problematic, it asks a more fundamental question: at which layer of the financial system does the digital euro belong, and what problem is it structurally intended to solve?

The Category Error: Why Products, Standards and Settlement Are Confused

A large part of the controversy surrounding the digital euro stems from a persistent category error. Different layers of the financial system are routinely conflated, leading to comparisons that are intuitively appealing but analytically flawed.

Payment products, payment standards and settlement infrastructures serve fundamentally different purposes. Yet in public and professional discourse they are often discussed as if they were interchangeable. When the digital euro is compared directly to initiatives such as Wero, card schemes or mobile wallets, the debate already operates on a distorted plane. These instruments address user experience, distribution and product innovation. They do not define the nature of money itself, nor do they provide settlement finality.

Similarly, standards such as SEPA are frequently treated as end-to-end solutions rather than what they actually are: harmonised rulebooks and message frameworks that enable interoperability within a defined currency area. SEPA has been remarkably successful in reducing fragmentation across Europe, but it does not constitute a settlement layer in its own right.

Operational clearing under SEPA is organised through commercial bank infrastructures, including pan-European arrangements such as EBA CLEARING as well as the broader network of automated clearing houses coordinated through EACHA. Legal settlement finality, however, is achieved only once transactions are settled in central bank money.

This distinction is not semantic hair-splitting. It is precisely the reason why SEPA works. Its stability is derived from the existence of a shared, public settlement layer that sits beneath private clearing arrangements. Without that foundation, standardisation alone would not deliver trust or resilience at scale.

The digital euro enters the debate at a different level altogether. It does not primarily address how payments are initiated, branded or experienced by end users. Nor is it designed to replace private-sector products. Instead, it touches the foundational layer of money: the form in which risk-free settlement is made available, governed and accessed in a digital environment.

When these layers are mixed, false dilemmas emerge. Questions such as whether a digital euro should “compete” with private solutions or whether existing standards already “solve the problem” miss the point. Competition takes place at the product and service level. Standards enable interoperability. Settlement defines finality and trust.

As financial processes accelerate and become increasingly automated, the consequences of this confusion grow more severe. Optimising execution without addressing the underlying settlement architecture risks building ever more sophisticated processes on foundations that were never designed for continuous, real-time operation.

Understanding the digital euro therefore requires a layered perspective. Only by separating products, standards and settlement can the debate move from ideological positions to architectural clarity.

SEPA, Clearing and Settlement: What Actually Happens

To understand why the digital euro debate so often drifts into misplaced comparisons, it is useful to look more closely at how settlement in the euro area actually works today. SEPA provides a common rulebook and message framework, but it does not eliminate the need for clearing and settlement layers that operate beneath it.

In practice, SEPA transactions are first processed through commercial bank clearing infrastructures. These include pan-European arrangements such as EBA CLEARING as well as domestic and regional automated clearing houses coordinated through the EACHA network. These infrastructures perform an essential function: they aggregate transactions, net positions and enable scale across a fragmented banking landscape. However, they operate in commercial bank money and do not themselves create legal finality.

Finality is achieved only at the level of the central bank. In the euro area, this role has traditionally been fulfilled by TARGET2, now succeeded by the consolidated T2 service. Once positions are settled in T2, obligations between banks are extinguished in central bank money, providing legal certainty and eliminating counterparty risk. This separation between clearing and settlement is deliberate and underpins trust in the system.

With the introduction of instant payments, this architecture has evolved further. The TARGET Instant Payment Settlement system (TIPS) extends central bank settlement into a 24/7, real-time environment. While instant payment schemes may differ in their front-end rules and reach, TIPS provides a common settlement layer that enables immediate finality in central bank money, independent of commercial bank cut-off times.

This distinction becomes increasingly important as payment flows accelerate. Clearing infrastructures can be optimised, standardised and scaled, but they remain intermediated. Settlement in central bank money, by contrast, provides a neutral and risk-free anchor that does not depend on the balance sheet of any single institution. In a world of batch-based processing, this difference was often invisible to end users. In a real-time environment, it becomes structurally relevant.

SEPA’s success is therefore not an argument against public settlement infrastructure, but evidence of its necessity. The combination of private clearing arrangements and a shared central bank settlement layer has allowed Europe to achieve both efficiency and stability. As payments move from deferred to instantaneous execution, the same principle must be applied consistently.

This is the context in which discussions about digital central bank money should be situated. The question is not whether existing standards or infrastructures are “good enough”, but whether the settlement layer itself is evolving in line with the operational realities of real-time finance.

Why “Non-Programmable Money” Misses the Point

One of the most frequently raised objections in the digital euro debate concerns programmability. Critics argue that if a digital euro is explicitly designed to be non-programmable, it cannot support modern, automated or real-time financial processes. This argument, while intuitively appealing, rests on another category error.

Programmability does not belong in money itself. It belongs in processes, systems and contractual logic that operate around money. Confusing these layers risks undermining the very properties that make money a reliable settlement asset.

Money performs a narrow but critical function: it provides a unit of account, a medium of exchange and, in the context of settlement, a final and irrevocable discharge of obligations. Introducing conditional logic directly into the settlement asset blurs legal boundaries and creates ambiguity around finality. Once money becomes subject to embedded conditions, it ceases to be universally fungible and legally neutral.

By contrast, modern financial systems are already highly programmable without altering the nature of money. Treasury systems define rules for liquidity thresholds, payment triggers and foreign exchange execution. Compliance engines apply regulatory logic before transactions are released. Payment systems enforce limits, sequencing and validation steps. In all these cases, programmability governs when and how transactions occur, not whether settled money remains settled.

This distinction is particularly important in real-time environments. As execution becomes continuous and automated, the settlement layer must provide certainty, not logic. Finality must be unconditional, instantaneous and legally robust. Programmability, meanwhile, must remain auditable, reversible and subject to governance, properties that sit uneasily within the settlement asset itself.

From this perspective, a non-programmable digital euro is not a limitation but a design choice. It preserves the role of central bank money as a neutral settlement anchor while allowing private and public actors to innovate freely at higher layers of the stack. Programmable finance does not require programmable money; it requires programmable access to money that remains final once transferred.

Framing the debate around whether the digital euro should be programmable therefore misses the more important question. The real issue is whether the financial architecture as a whole allows programmable processes to reliably settle in risk-free money, at any time and at scale.

The Market vs. Infrastructure Fallacy

Another recurring fault line in the digital euro debate is the claim that public involvement in digital settlement infrastructure constitutes unwarranted intervention in a private market. According to this view, central banks should refrain from providing new instruments and instead allow competition between private solutions to determine outcomes. While appealing in abstract terms, this argument overlooks how payment systems have historically evolved and how markets for money actually function.

Settlement infrastructure does not behave like a typical competitive market. It exhibits strong network effects, high fixed costs and systemic externalities. Trust, finality and universal acceptance cannot be optimised independently by competing actors without fragmenting the system as a whole. For this reason, core settlement layers have traditionally been treated as public goods or public–private utilities, even in highly market-oriented economies.

Europe’s own experience illustrates this clearly. TARGET services do not crowd out competition; they enable it. By providing a neutral, risk-free settlement layer in central bank money, they allow private clearing infrastructures, payment schemes and service providers to compete on products, pricing and user experience without having to replicate settlement finality individually.

International examples reinforce this logic. India’s UPI combines private innovation with a publicly governed settlement backbone that ensures interoperability and scale. In the MENA region, Buna provides a regional settlement infrastructure designed to reduce fragmentation and risk while supporting cross-border trade. In both cases, public involvement does not replace markets; it creates the conditions under which markets can function efficiently across institutional and geographic boundaries.

The fallacy lies in treating infrastructure provision as equivalent to product competition. Central banks do not compete with wallets, schemes or banks by offering settlement. They define the rules of the game at the lowest layer, allowing higher layers to innovate. Without such a foundation, market dynamics tend to favour closed ecosystems, proprietary standards and gatekeeping rather than openness and interoperability.

As payments and financial processes move towards real-time execution, these dynamics intensify. Speed amplifies both efficiency and risk. In this context, relying solely on private settlement arrangements increases systemic fragility, particularly in cross-border scenarios where trust and legal certainty cannot be assumed.

Seen through this lens, the role of the central bank is not to displace the market, but to stabilise it. Public settlement infrastructure is not an alternative to competition; it is its prerequisite.

From Payments Infrastructure to Real-Time Finance and Global Trade

The architectural questions discussed so far are not confined to the payments domain. They increasingly shape how companies manage liquidity, risk and execution across global value chains. As corporate finance moves towards real-time and programmable operating models, the limitations of today’s settlement landscape become more visible.

Treasury functions are a useful lens through which to observe this shift. What was once a batch-oriented, end-of-day discipline is evolving into a continuous process. Liquidity positions are monitored in real time, foreign exchange transactions are triggered automatically based on predefined conditions, and payments are increasingly embedded directly into operational workflows. In such an environment, execution speed alone is no longer sufficient. What matters is whether settlement can keep pace with decision-making.

This is where the separation between retail, merchant and corporate perspectives begins to break down. While use cases differ, they ultimately depend on the same foundational properties: immediacy, certainty and interoperability. A payment that settles instantly for a consumer but remains subject to deferred or intermediated settlement at the institutional level introduces hidden friction into corporate processes that rely on predictable outcomes.

Real-time finance therefore exposes a structural gap. Processes can be automated and accelerated, but settlement often remains anchored in architectures designed for delayed finality and limited operating hours. As long as this gap persists, programmability remains constrained. Automation accelerates actions, but it does not eliminate settlement risk.

From a global trade perspective, this challenge is magnified. Corporates operating across currencies and jurisdictions require settlement mechanisms that are not only fast, but also universally trusted and legally robust. Fragmented settlement arrangements, dependent on bilateral relationships or proprietary networks, create barriers that disproportionately affect cross-border activity and smaller market participants.

This is the context in which discussions about instant payments, central bank settlement and digital money converge. The question is not whether retail or wholesale use cases should take precedence, but whether the settlement layer itself can support continuous, programmable processes across the entire financial stack.

Global Instant Payments, understood as an architectural objective rather than a single scheme, depend on precisely this coherence. They require alignment between execution, settlement and governance, ensuring that speed does not come at the expense of trust. Without such alignment, real-time finance remains an optimisation of today’s constraints rather than a transformation of the system.

Conclusion: Moving the Debate to the Right Level

The debate surrounding the digital euro has become a proxy for broader anxieties about control, competition and technological change. Yet much of this debate remains misaligned with the actual challenges facing modern financial systems. By conflating products, standards and settlement layers, it obscures the architectural questions that must be addressed as finance moves towards real-time and programmable operation.

This article has argued that the digital euro should not be understood primarily as a payment product or a competitor to private solutions. Its relevance lies at a deeper level: as a potential component of a public settlement layer designed to provide finality, trust and resilience in an increasingly automated financial environment. Whether implemented through CBDC or other forms of central bank money, this layer performs a function that markets alone cannot reliably replicate.

As payments, treasury and trade processes accelerate, settlement quality becomes more important, not less. Speed without finality merely compresses risk. Programmability without a coherent settlement foundation amplifies fragility. Addressing these tensions requires architectural clarity rather than ideological positioning.

Europe’s experience with SEPA, TARGET services and instant payments demonstrates that public settlement infrastructure and private innovation are not opposing forces. They are complementary layers of the same stack. When designed coherently, they enable competition, interoperability and scale while preserving trust.

The digital euro debate therefore needs to move beyond the question of whether such an instrument should exist. The more important question is how Europe designs a settlement architecture capable of supporting real-time finance and global trade in a way that is open, resilient and inclusive.

Payments architecture deserves architectural thinking, not fear-based narratives. Only by elevating the discussion to the right level can financial infrastructure evolve from incremental optimisation to genuine transformation.

References and Further Reading

Central Bank and Global Infrastructure

• Bank for International Settlements (BIS) (2020): Enhancing Cross-border Payments: Building Blocks of a Global Roadmap
• CPMI, BIS (2021): Enhancing Cross-border Payments: Stage 2 Priorities for the G20 Roadmap
• BIS Innovation Hub (2022–2024): Project mBridge
• BIS Innovation Hub (2023): Project Nexus
• CPMI-IOSCO (2012, updated 2023): Principles for Financial Market Infrastructures (PFMI)

European Settlement and Payments

• European Central Bank (2023): The Digital Euro: A Payments Solution for Europe
• European Central Bank (2024): Wholesale Central Bank Digital Currency — Design Considerations
• Eurosystem: TARGET Services (T2, TIPS) — Functional Specifications
• European Payments Council: SEPA Credit Transfer and SCT Inst Rulebooks

Standards and Messaging

• ISO: ISO 20022 Universal Financial Industry Message Scheme
• SWIFT (2023–2025): ISO 20022 Migration for Cross-Border Payments and Reporting
• SWIFT (2024): Unlocking the Value of Rich Data

Industry and Practice

• BMW Group Treasury (2024–2025): Public disclosures on real-time treasury initiatives
• Siemens Treasury (2021–2024): Public disclosures on programmable payments and settlement
• JP Morgan Kinexys (formerly Onyx): Public documentation on programmable payments and tokenised settlement

The Digital Euro Debate Is Stuck at the Wrong Level was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.