The ECB insists that cash’s role will be protected once the digital euro goes live. But can its word be trusted?
This is a story you’re unlikely to see on the front pages — or indeed any pages — of Europe’s newspapers: cash is staging a comeback. According to the European Central Bank (ECB), the amount of cash in circulation in the Euro Area’s 20 member states is once again growing after “plateauing” for a couple of years (2023-2024). Speaking at the European Chamber of Commerce on Monday, ECB executive board member Piero Cipollone said:
At present, 30.4 billion banknotes are in circulation, with a total value of €1.6 trillion. After plateauing when we raised interest rates – which made it less attractive for people to hold large amounts of savings in cash – these figures are growing again, currently at an annual rate of 2.3% in terms of volume and 1.7% in terms of value. To put it into perspective: almost €5,000 worth of banknotes are currently in circulation for each euro area citizen.
The demand for cash during crises, such as the 2008 financial crisis, the European sovereign debt crisis and the COVID-19 pandemic, underscores its importance, especially in turbulent times. Chart 1 highlights the robust demand for banknotes, with spikes during these crises when the annual growth rate of banknotes in circulation more than doubled. The ECB and the national central banks (NCBs) maintain ample stocks of banknotes and effective distribution channels to ensure they are ready to meet these sudden surges in demand.
Possible Reasons for Cash’s Rebound
Aside from Cipollone’s rather questionable explanation, of plateauing interest rates, it is not entirely clear why demand for euro notes and coins is increasing once again.
Could it be fear of another looming crisis? Given the state of Europe’s economy and the destabilising impact of Trump’s tariffs, it’s perfectly possible. There’s also the accelerating (though still somewhat genteel) decline of the US dollar? In June, the ECB President Christine Lagarde posited that a “global euro” could be a major beneficiary of that decline — a notion that Thomas Fazi dismissed as fantasical given the currency’s myriad structural flaws.
Or is it that more and more people are storing emergency reserves of cash at home, as some European governments and even the EU itself have recommended in recent months. It’s also true that the anomaly in the long-term trend is not the recent return to growth but rather the brief period of negative growth that preceded it.
One thing that is clear is that cash use remains strong in the Euro Area despite the growing popularity of digital payments. While the overall share of cash payments at the point of sale (POS) has declined in recent years, it still accounted for 52% of transactions in 2024, according to the European Central Bank’s (ECB) 2024 Study on the Payment Attitudes of Consumers in the Euro Area (SPACE). That’s down from 59% in 2022 and 72% in 2019.
It’s still a surprisingly high figure, especially given the concerted efforts of cash’s legion of enemies (banks, payment processers, big tech, fintechs, governments and, in some cases, central banks) to impede its use. Cash also accounts for 39% of the total value of POS payments across the Euro Area, as the bottom bar in the chart below shows.
The most cash-intensive countries in the Euro Area are Malta (67% of the share of payments are in cash), Slovenia (64%), Austria, Spain and Slovakia (57%), and Germany (52%). The less-cash countries are the Netherlands (22%), Finland (27%), Luxembourg (37%) and Belgium (39%).
A Tool of Trust
The resilience of cash payments in the Euro Area mirrors similar trends we have seen elsewhere. In the UK, for example, cash use has rebounded slightly since 2022 — despite all the efforts by the largest lenders to restrict cash access. Data from the Nationwide Building Society in January this year showed that cash payments have risen for a third year in a row — findings that are backed up by data from the British Retail Consortium.
These trends counter the prevailing narrative of the past decade — that cash’s decline is as inevitable as it is desirable, and that a cashless economy is a matter of when not if. That belief was reinforced by the unprecedented explosion of e-commerce and contactless payments during the COVID-19 lockdowns. But that trend has slowed — and in some places, reversed — in the past couple of years.
Many have rediscovered — or in the case of many Gen Zers, discovered — the budgetary benefits of using cash at a time of sticky inflation. Geopolitical trends have led some of the world’s most cashless countries (Sweden, Norway, Finland…) to reconsider the wisdom of abandoning cash altogether while recent natural disasters and payment outages, including Spain’s recent one-day blackout, have shone a spotlight on the fragility of cashless economies and the vital role of cash as a contingency payment option.
In a world that seems increasingly fragile, cash stands out as a tool of trust, a source of systemic resilience. In 2022, holding cash at home surged, especially among 18-37 year olds, according to the ECB’s SPACE report. This age group, considered ultra-digital, increasingly sees cash as a fallback solution. In the Euro Area as a whole, 62% of respondents said it is important to be able to pay in cash. Even in the most digitally advanced countries, this option remains vital.
At the same time, however, most central banks around the world, including the ECB, are forging ahead with plans to launch a central bank digital currency. According to the Atlantic Council’s CBDC tracker, 137 countries & currency unions, representing 98% of global GDP, are exploring a CBDC. That apparently includes the US, which is curious given the Trump Administration’s recent executive order halting all work on a retail CBDC:
In 2025, President Trump issued an executive order to halt all work on a retail CBDC, making the US the only country to do so. However, the US continues to engage in wholesale cross-border payments research through Project Agorá, an initiative in collaboration with six other major central banks.
The Euro Area, like 40 other jurisdictions, including all five founding members of the BRICS, is at the pilot phase. According to the Atlantic Council’s CBDC tracker, the world’s largest currency bloc is “advancing a ‘global euro moment as it pilots the digital euro, aiming to strengthen the euro’s international role.” The “preparation” phase of the digital euro is scheduled to end this October as the European Parliament, the EU’s rubber stamping chamber legislative assembly, votes to approve the definitive legal framework for the bloc’s proposed CBCD.
In fact, the digital euro is apparently so close to completion that in recent months the ECB and the EU Commission have decided that the time has finally come to sell the project to the people — with the help, of course, of the legacy media and news agencies. From out March 15 post, “Five Reasons Why Euro Area Citizens Should Be Terrified By the ECB’s (Apparently) Fast Approaching Digital Euro“:
So, how do you sell a project whose advocates (in the words of Federal Reserve Governor Christopher Waller) “often fail to ask a simple question: What problem would a CBDC solve?”
The answer, it seems, at least in the case of the Euro Area, is to generate as much fear as possible about Europe’s outsized dependence on US payments providers as well as the growing threat posed by (predominantly US-based) stablecoins.
The European Central Bank chief economist Philip Lane has warned that Europe’s outsized dependence on US payment providers could leave it open to future economic coercion.
This, lest we forget, is the same trade and currency-bloc that has prostrated itself before Trump by signing one of the world’s most unbalanced trade deals ever.
The most cited justification for launching a CBDC is to preserve the relevance of public money. In most modern economies, a tiny fraction (just 3-5%) of money takes the form of physical cash
created by the central bank. The remaining 95-7% comes in the form of electronic bank deposits created by private commercial banks, which is not public money.
ECB President Christine Lagarde says the digital euro is necessary in order to preserve Europe’s monetary sovereignty — oh, the irony. According to the German financial journalist Norbert Häring, the only identifiable function of the digital euro is to “help displace cash and bring Europe closer to total digital surveillance.”
The fact that the approaching launch of the Digital Euro follows on the heels of the launch last year of the EU’s digital identity wallet is no coincidence. As we have noted on numerous occasions since our March, 2022 post, “Unbeknown to Most, A Financial Revolution Is Coming That Threatens to Change Everything (And Not for the Better)“, the mass rollout and adoption of a digital ID is a necessary precondition for the mass rollout and adoption of a CBDC.
EU officials insist that the adoption of the digital euro will not signify the end of cash. In his talk to the European American Chamber of Commerce on Monday, Cipollone said EU authorities “are fully committed to cash and are working to ensure that it remains widely available and accepted”:
[R]est assured: a digital euro will not replace banknotes and coins but rather complement them, offering a “digital expression of cash”[20] that expands the benefits of cash to digital payments. The availability of cash in both physical and electronic form will strengthen Europe’s autonomy in payments. With a digital euro alongside cash, Europeans will benefit from a broader range of payment methods. They will be able to use central bank money for nearly all types of payments, including online transactions, and they will benefit from enhanced safety, security, efficiency, privacy and inclusivity.
As we move forwards, euro area consumers will appreciate having banknotes, coins and digital euros in their wallets – all with legal tender status, accessible anytime and anywhere, and tailored to diverse payment preferences and scenarios. Cash will therefore remain highly relevant and will exist alongside other means of payment. Particularly in times of crisis, cash can serve the public’s critical needs that alternatives cannot fully replace.
Cash, Cipollone pointed out, remains functional even when electronic payment systems are disrupted by power outages, internet failures, software malfunction or other events:
Recent natural disasters and geopolitical tensions have underscored the urgency of ensuring cash continues to circulate to support confidence and economic stability during crisis episodes.
The ECB collaborates with the European Commission on the EU Preparedness Union Strategy, which emphasises the role of cash in strengthening societal resilience. We also work closely with the NCBs to enhance crisis preparedness and ensure that cash remains available during emergencies. The recent power blackout in the Iberian Peninsula once again demonstrated that cash, being independent of technology, can always be relied on.
The ECB will apparently work together with banks, arguably the biggest enemies of cash, to ensure that communities across the Euro Area will have adequate access to cash services — “striking the right balance between fulfilling consumers’ needs and enabling banks to enhance their efficiency.” At the same time, Cipollone says that the ECB and Commission will be setting clearer rules for the mandatory acceptance of cash across the Euro Area:
Practices such as merchants refusing cash or displaying “no cash” signs are not only undesirable, as they restrict the payer’s freedom of payment choice, but are also fundamentally inconsistent with the legal tender status of euro cash, as interpreted by the Court of Justice of the European Union (CJEU).[14] One of the reasons why the ECB strongly opposes such practices, which unfortunately seem to be becoming more widespread, is that they risk excluding some members of society, especially those that rely on cash.
The ECB stressed this critical stance in its opinion on a proposal for a regulation on the legal tender of euro banknotes and coins, in which it advocated for a clear prohibition of such “no cash” practices. To address this issue, the designated national competent authorities must monitor and enforce compliance once the Legal Tender of Cash Regulation comes into effect. Furthermore, as with any European Union regulation, Member States must establish effective and deterrent sanctioning regimes.
Too Good to Be True?
It all sounds too good to be true, and probably is — especially if the European Commission is in any way involved, which it almost certainly will be. Häring has documented how the Commission, after waging open war against cash for the best part of the past decade, now wants to give decisive preference to the digital version of central bank money with its parallel directives on the digital euro and euro cash (machine translated):
The draft directive on the digital euro provides for it to become the second legal tender after cash. Only small shops would have the right to exclude the acceptance of the digital euro by unilateral declaration, for example with a sign on the shop door. All other commercial payees would be prohibited from doing so.
In contrast, the draft Cash Directive provides that any transaction can continue to refuse to accept euro cash by unilateral declaration. It is to be based on the voluntary agreement that payment can only be made in cash if, for example, someone enters the relevant sales outlet despite such a sign. State agencies, which cannot be assumed to be voluntary, should nevertheless have the right to refuse to accept cash if it is deemed to be in the public interest. This is already assumed if it is cheaper for the state not to accept cash.
The Commission only wants to compel governments to take countermeasures if it finds that the refusal to accept cash has become so widespread that it is no longer possible to pay with cash as a general rule. By then, it would probably already be too late to save cash.
On the surface, the ECB opposes the Commission’s stated intent to discriminate against cash as a means of payment vís-á-vís the future CBDC. Of course, it’s no surprise that the Commission is keen to favour the digital euro over cash given the CBDC’s programmable features will grant EU authorities much greater control over the Euro Area economy and its citizens, as we explained in our previous post.
However, can the ECB be trusted as a cash advocate, especially with the CBDC so close to launching. After all, the ECB under former Goldman banker Draghi formed a common front against cash with the Commission, even going so far as to approve some of the extreme cash payment caps introduced by some EU national governments in recent years, including Greece’s €500 limit.
In more recent years the ECB has reversed many of these policies. The Greek government proposed to slash the cash limit even further in 2019, to €300, but the ECB blocked the move. However, Häring sees the ECB as more of a neutral party than a genuine defender of cash, citing his own experience in a court case over the right to pay the German national broadcaster’s fee in cash, which reached the European Court of Justice:
The only support offered by the ECB representative at the oral hearing was an argument that there are service providers who can accept cash at favourable prices in retail payment procedures. This actually fundamentally undermined the central argument of the opposing side that accepting cash in retail payment procedures is too expensive and that there is therefore a public interest in being able to refuse it. However, the EU Advocate General, who almost completely adopted the EU Commission’s line of reasoning, ignored this in his ruling, as did the Court of Justice.
This brings us to the crux of this issue: the word of EU institutions cannot be trusted given they are constantly breaking even their own rules and regulations. Take the way the Commission President Ursula von der Leyen has run roughshod over the EU’s transparency and accountability rules in the Pfizergate scandal without facing any consequences. Or the way the Digital Services Act contravenes the EU’s own laws on freedom of expression and information, including Article 11 of the EU Charter of Fundamental Rights.
A programmable digital euro could be used, among other things, to trace transactions in real time, deduct taxes or fines automatically, block undesirable payments (or payments by undesirable parties), or even set expiry dates on YOUR money. It would allow authorities much more centralised and granular control of the economy. It could also be used as a mass-debanking tool, paving the way for a new age of financial exclusion.
But for all that to happen, cash will have to be phased out. As readers may recall, ECB President Christine Lagarde freely admitted — in a phone conversation she thought she was having with Ukraine’s President Volodymyr Zelensky when in fact she was actually talking to a notorious group of Russian pranksters — that one of the main objectives of a digital euro is control and surveillance of people’s spending habits.
“There will be control. You’re right. You’re completely right. We are considering whether for very small amounts, you know, anything that is around €300, €400, we could have a mechanism where there is zero control. But that could be dangerous…”
Here’s the recording in full:
In conclusion, any pledges by the ECB and/or the Commission to safeguard cash once the digital euro goes live should be taken with a generous punch of salt. The EU can change the rules of the game whenever it wants and however it wants, as it has been doing since its inception. That prospect should terrify EU citizens given the driving mission of the EU is to accrue to itself more and more centralised power and control over Europe’s citizenry, companies and societies.
Cash cannot be held on a corporate balance sheet if the individual who has the legal right to it holds it in-hand. But, in a digital world, where essentially every dollar can be accounted for at a given time by a computer, companies can create financial instruments and leverage for themselves and one another that is quite impossible if individuals preferred to hold a preponderance of cash (and exercised their option to do so).
So while I completely agree that the interest of governments in digital payments has a underlying surveillance motive, the motivations of corporations are driven purely by a profit-seeking incentive.
And so, we have a very powerful confluence of interests where both the state and the corporations have a vested interest in abolishing cash, although for different reasons.
Oddly enough, in my corner of EU the focus is on the other part of the Digital Euro package: cash must be accepted at all points of sale, and there will be a minimum distance to an ATM.
Around here companies don’t have to accept cash payments, so many don’t (60% of people use cards or mobile pay) and now they are making noises because the directive establishing ECB Digital Euro will also enforce cash payments.
Same for banks, they really, really don’t want to rebuild the ATM networks they greedily destroyed in the last decade or so. And not just rebuild, but to extend it from what it was.
As property crime is on the rise here – we do need to support Ukraine even if makes us poorer – I can understand why many shopkeepers and such don’t want to keep cash around, though.
I’m thinking how this may play out if the EU forces in a digital currency. First thing they would do is to destroy the Euro printing presses and the plates so that there is no going back like they do in countries that adopt the Euro. The question arises if they try to outlaw the possession of Euros. They are fanatical enough to do it but may grudgingly accept a period of ‘grace’ on practical grounds. But I can see the rise of a black market as who wants the government looking over your shoulder if you buy just a Mars bar – and pay some new made-up taxes on that transaction. Any black market will need some sort of currency so it might be that those old Euros would serve that purpose which might partially explain people hoarding them. If the EU outlaws them, then expect the influx of US dollars as they are so plentiful and they were used once behind the Iron Curtain back in the day. So what I want to know is what happens if the net or the electricity grid goes down over a huge area. Paying bills in such circumstances can be deferred but eating can’t. Especially when people see all that food in shut down supermarkets just sitting there and slowly rotting. By the third day, that is when things will get antsy and even riot police have to eat. To repeat a Star Wars saying ‘I’ve got a bad feeling about this.’
India did this with rupee notes literally overnight in 2016 and the penalty for having old currency is severe enough that no one wants to even see an old note. I was stuck with a Rs500 because I was out of the country, and I keep it for good luck lol. But when I show it to an Indian, they look at me like I’m nuts for having it. Would rather that I burn it. I fear that this will be the model the EU springs on us to shift to the digital euro. If it worked on a country of over a billion people…
Older Swiss banknotes have been demonetized as well, pretty much everything from the 1980’s and before.
The difference being that the Swiss offered a long grace period of turning them in for new notes. Something along the lines of 10-20 years.
When I used to go to coin shows in Switzerland, i’d end up with a bunch of Swiss coinage beforehand to take with me to spend there, and when i’d attempt to use a pre 1970 silver 5 Franc coin, the merchant would reject it, as it had been demonetized, crazy eh?
Let’s not forget Nigeria’s recent brush with demonetisation, which sparked nationwide riots as cash ran out and which was partly driven by the central bank’s desperation to get people using its stillborn CBDC, the eNaira. That didn’t happen but less than a year later the country was suffering its “worst economic crisis in decades”, as reported the New York Times in an article that doesn’t one mention the central bank’s demonetisation program.
I was not aware that Greece now has a €500 limit on cash payments. I’m glad to have conspired to break that limit on multiple occasions already. Hopefully I will be able to continue to do so, and willfully rather than accidentally in the future.
As I’ve now included in the post, the Greek government proposed to slash the cash payment limit even further, to €300, in 2019, but the ECB opposed the move.
CBDC and Digital ID go together. That’s a problem. Two prongs of a pincer attack on citizens to build a digital panopticon.
It seems to me to be an intriguingly experimental approach to having almost an entire continent commit economic and political suicide as country after country changes régimes and breaks out of the totalitarian confines of the EU and makes their peace with the rest of the real world by applying to join BRICS.
Seems to me that the power outage in Spain (or was it Portugal?) convinced a lot of people that they needed to hold onto cash.