1 Introduction

Ladies and gentlemen,

It is a great honor to speak here today in Tokyo, a city renowned not only for its rich history and culture but also for its innovation and leadership in the global financial world. I extend my heartfelt thanks to our hosts, the Japanese Ministry of Finance and the Bank of Japan, for this opportunity to engage in such an important exchange.

Japan and Europe share a long tradition of collaboration in economic, technological, and cultural matters. In times of global challenges – ranging from geopolitical tensions to the profound transformations brought about by digitalization – it is more important than ever to strengthen our partnerships and learn from one another.

Today, I would like to discuss a topic of great importance not only for Europe but also for the global financial system: the digital euro. This project exemplifies Europe’s efforts to create a future-proof, sovereign, and trustworthy infrastructure for payments. I am convinced that the exchange with you, our Japanese partners, can provide valuable insights, as Japan’s pioneering role in the digitalization of the financial sector offers important experiences and perspectives.

Let us explore together how innovation and collaboration regarding central bank digital currencies can lay the foundation for a stable and secure financial infrastructure. This will benefit not only our respective regions but the world as a whole.

2 The Digital Euro: Addressing Dependencies and Strengthening Sovereignty

The global financial system is undergoing significant shifts. New geopolitical alliances are forming, challenging countries' political and economic autonomy. One area where Europe is particularly dependent on non-European providers is retail payments. While cash – especially in Germany – still plays an important role, digital payment systems such as cards, apps, and online platforms are becoming increasingly dominant.

Currently, about 60 percent of all card payments in the euro area are processed by non-European, primarily U.S.-based systems. Thirteen of the 20 euro area countries rely exclusively on such systems. While some countries, like Germany with its girocard, have domestic solutions, these are often limited to national use and specific applications. Similarly, in mobile payments and online commerce, major non-European providers like Apple Pay and PayPal hold strong market positions.

The popularity of these systems is understandable – they are convenient, reliable, and usable across borders. However, Europe lacks a unified digital payment system that allows seamless transactions both locally and online. This dependency is concerning because payment systems are not just technical tools; they are critical infrastructure. Disruptions in these systems could lead to severe financial and economic consequences. Moreover, private providers gain valuable insights into economic and personal relationships, raising concerns about data sovereignty.

Geopolitical tensions further highlight the risks of such dependencies. Payments could be blocked for political reasons, as seen in 2010 when the U.S. government prompted American payment providers to block donations to WikiLeaks in Europe, even without a European legal basis.

To ensure the smooth functioning of payment systems, the central banks in the Eurosystem are advocating for pan-European solutions. A cornerstone of this effort is the digital euro – a central bank digital currency (CBDC) for everyone.

3 The Digital Euro: A Practical and Strategic Solution

The digital euro is envisioned as a "digital twin of cash," sharing many of its characteristics. Like cash, it would be issued by the central bank, fail-safe, free of charge for end users, and offer a higher degree of privacy than other digital payment methods. Additionally, offline payments would be possible to a limited extent, ensuring functionality even during internet or power outages.

This digital currency would serve as a practical payment solution for 340 million people in the euro area, usable at checkout counters, in restaurants, for peer-to-peer transactions, and in online commerce. Beyond its practical applications, the digital euro offers significant strategic advantages.

Europe cannot afford to remain heavily dependent on foreign providers for critical infrastructure like payments. The digital euro would operate entirely on European infrastructures, granting a degree of independence. European standards would ensure a resilient and future-proof payment system while simplifying cross-border transactions.

Moreover, the digital euro would strengthen the resilience of euro area economies against competing currencies and stablecoins by safeguarding the anchor function of central bank money. Unlike stablecoins, which are subject to liquidity and credit risks, the digital euro would provide a secure and reliable alternative. Stablecoins, particularly those based on the U.S. dollar and not regulated within Europe, are not a viable substitute from a European perspective.

The digital euro could also serve as a platform for innovation, driving the digital transformation of the European economy. However, this ambitious project will take time. At the Bundesbank, we anticipate a gradual introduction no earlier than 2028. This is also due to the legislative process for the introduction of a digital euro by the European co-legislators which is still ongoing. 

4 Conclusion and outlook

Ladies and gentlemen,

The digital euro represents a pivotal step for Europe on its journey toward greater digital autonomy and sovereignty. While the digital euro cannot address every challenge, it serves as a cornerstone of Europe’s strategic response.

It ensures that central bank money remains accessible in digital form for everyday transactions, supported by European infrastructure, developed together with banks. Alongside private European payment solutions, and wholesale CBDC for financial markets, it provides a secure anchor in an ever-changing financial landscape. 

The introduction of the digital euro is not about isolating Europe; it is about taking a decisive step toward greater sovereignty and independence.

As we move forward, collaboration with global partners like Japan will be essential. By sharing knowledge and experiences, we can collectively shape a financial future that is stable, secure, and inclusive. Let us seize this opportunity to work together for the benefit of our regions and the stability of the global financial system.