The Digital Euro Will Only Work If It Is Easier Than The Dollar

-By Pavlo Kharmanskyi, founder of OnlyMonster–

Last week, the ECB opened applications for online and mobile merchants to take part in the digital euro pilot, with testing due to begin next year. For me, this is where the project starts to get genuinely interesting, because it is moving out of the realm of monetary theory and into the rather less tidy reality of how people actually pay for things.

I should add a caveat at the outset. I do not run a payments company and I am certainly not a central banker. I build technology for digital businesses, which means I spend a lot of time thinking about adoption, integration and the small operational frictions that can make a supposedly elegant piece of technology surprisingly difficult to use in practice.

That is probably the more useful lens for me to bring to the digital euro than pretending to have strong views on the future of monetary policy.

I was building products around Ethereum and crypto mining back in 2016, and one of the lessons from that first wave of crypto was that technologists can quite easily mistake a better or more interesting payment rail for a reason to change behaviour. It isn’t. Consumers do not care how clever the infrastructure underneath a payment is, and merchants certainly will not adopt something simply because it is technologically novel.

I was probably guilty of some of that thinking myself at the time. When you are close to the technology, it is very easy to assume that what fascinates you will also fascinate the person using it.

Usually, it does not.

What people care about is whether something works, whether it is easy and whether it makes their life slightly better than whatever they were using before. That sounds almost embarrassingly obvious, but technology has a habit of forgetting it, particularly when the infrastructure itself is technically impressive. There is a difference between creating a new rail and creating a reason to use it, and that gap is where an awful lot of otherwise clever products end up disappearing.

That is why the merchant pilot matters. Until now, much of the digital euro discussion has understandably focused on the bigger questions: privacy, financial stability, monetary sovereignty, the role of commercial banks and the extent to which Europe should depend on payment infrastructure operated by private companies, many of them based elsewhere.

Those are serious issues, and I would not pretend to have greater expertise on them than the people who spend their careers studying them. But underneath all of that sits a much more prosaic question that may ultimately matter just as much: what will make a merchant actually want to use it?

Does it mean getting paid faster? Is it cheaper? Does it make cross-border transactions easier? Does it fit into existing systems without creating another layer of work? Is reconciliation simpler? Can somebody add it to a checkout without having to rebuild half the business around it? These are not glamorous questions, but that is rather the point. Payment infrastructure becomes important when it stops being interesting in itself and starts making other things easier.

We see a version of that every day at OnlyMonster. We work with 14,000 creator accounts across more than 100 countries, and we are not a payments business. Our job is to help people operate creator businesses across different platforms, teams and markets. From the outside, many of those businesses look wonderfully simple: someone makes content, builds an audience and earns money from it. Behind that can sit several platforms, different markets, different currencies, different rules, multiple software products and a steadily growing collection of operational jobs that somebody still has to deal with.

And when we speak to creators and agencies, including those based in Europe, we already see a fairly pragmatic response to this complexity. Many are comfortable using dollar-denominated digital assets such as USDC or USDT when they need something fast, wildly accepted and relatively easy to move.

That might mean converting funds quickly, paying relatively small amounts to contractors or virtual assistants, or simply moving value between different parts of an international business without creating another layer of administration. They are not necessarily making an ideological choice about the dollar of about crypto. In most cases, they are choosing the thing that creates the least friction.

The payment itself is only one small part of that picture, which is why I do not think the digital euro should be judged simply as another payment method. The more interesting question is whether, over time, it can reduce some of the fragmentation around digital commerce rather than simply adding another option to an already long list.

Europe does not suffer from a shortage of ways to pay.

For international digital businesses, the problem can sometimes be the opposite. There are plenty of providers, platforms and systems, each of which works slightly differently, carries its own requirements and has to be fitted into everything else the business is already doing. Another logo at checkout is not, by itself, progress.

A common public rail becomes more interesting if it allows other things to become simpler: cheaper settlement, easier movement between markets, more consistent products across Europe, or services that private companies can build without having to stitch together quite so many different pieces underneath.

There is also a slightly uncomfortable European point here. If businesses and creators find the dollar-based digital ecosystem easier to use than euro-based alternatives, then a growing part of the digital economy naturally ends up operating in dollars, even when the people involved are sitting in Partis, Berlin or Madrid.

The success of dollar-denominated stablecoins tells us something quite useful: people will move towards infrastructure that is liquid, convertible, fast and easy to use. A digital euro that can offer similar freedom, with proportionate KYC and compliance rather than adding more friction, suddenly has a much clearer reason to exist.

Whether the digital euro can actually do that is another question, and I think a bit of humility is useful here. Large technology projects tend to arrive accompanied by confident predictions about what they are going to transform. Sometimes those predictions are right. Quite often, the technology ends up becoming useful for reasons that were not obvious at the beginning, while the original grand use case quietly recedes into the background.

Crypto offers a decent warning. When I was working around Ethereum in 2016, a great deal of attention went into explaining the technology itself. Blockchains were new, technically fascinating and, to those of us interested in them, felt inherently important. The mistake was sometimes assuming that everyone else would want to understand the rails too. Most people did not, and why should they? The more durable idea was not that ordinary users would become passionate about blockchains. It was that new infrastructure might make it possible to build things that had previously been difficult to build.

There may be a useful lesson there for the digital euro. Its long-term value may have very little to do with whether European consumers become enthusiastic about the concept of a central bank digital currency. In fact, if people need to understand what one is before they can comfortably use it, I suspect that is probably a bad sign. Most successful infrastructure disappears. Very few people think about the networks involved when they tap a card or the protocols involved when they open a website. They judge the experience in front of them. Did it work? Was it quick? Was it easy?

Merchants are not so different. Every new system carries an integration cost, even when the system itself is good. It has to work with existing software, somebody has to understand it, finance teams have to reconcile it and someone has to deal with the exceptions when something goes wrong. The larger and more international a digital business becomes, the more those small complexities accumulate, which is why I am less interested in whether the digital euro is technologically impressive than whether it eventually removes some of that complexity.

The ECB can create the infrastructure and Europe can legislate for acceptance, but neither guarantees that people will choose to use it. Nor does formal acceptance mean businesses will build useful things around it. The pilot now has to expose the idea to the inconvenience of actual commerce: real checkout systems, real accounting processes, real integration problems and real customers who will happily abandon a transaction because something takes two clicks longer than they expected.

That is probably the most valuable part of the exercise. If the digital euro becomes simply another payment method that businesses are expected to support, its impact may be fairly limited. If it becomes infrastructure that makes other parts of operating a digital business cheaper, simpler or less fragmented, then the calculation begins to look different. There is potentially a very significant market already sitting in front of it among digital businesses that currently reach for dollar-based alternatives simply because they work.

I would be cautious about pretending anyone can put a precise number on that today, but I can easily see the opportunity running into tens of billions of euros of annual activity if the product is genuinely as usable, convertible and efficient as the alternatives people already have. And if companies can eventually build useful products on top of it without their customers needing to know or care that a digital euro is involved underneath, that may be the point at which it becomes genuinely important.

The real test of this pilot is whether the digital euro can become almost invisible: another way to pay that is faster, cheaper and easier for the merchant and requires virtually no new behaviour from the customer. If it can do that, it starts to look less like Europe’s answer to crypto and more like something potentially much more important: a public payment rail on top of which private companies can build.

I do not know yet whether it will get there, and I would be suspicious of anyone who claims to know. But moving from the theory into real businesses is how we start finding out.