Lagarde puts a clock on the digital euro: a 12-month pilot in late 2027, but only if the law passes by the end of this year

Europe's central bank has put a date on its digital currency, with a condition attached. In a written statement to the International Monetary and Financial Committee at the IMF Annual Meetings on Saturday, October 17, ECB President Christine Lagarde said the bank will run a 12-month internal pilot of the digital euro in the second half of 2027. Adopting the regulation that establishes the digital euro by the end of 2026, she said, is key to making that possible.

The ECB is preparing the digital euro as a digital equivalent of cash for day-to-day payments. "The digital euro will further stimulate innovation and competition in retail payments," Lagarde said, adding that public and private payment options existing side by side supports Europe's strategic autonomy in payments.

The statement also covered tokenised finance. Pontes, the Eurosystem's system for settling tokenised asset deals in central bank money, went live on September 21, and the Appia initiative is meant to deliver a blueprint for a European tokenised ecosystem with common standards, shared infrastructure and European governance.

The backdrop is uncomfortable. Euro area inflation rose to 3.8% in September, mostly because of energy, with core inflation at 2.5%. The ECB expects headline inflation to stay well above target into the first half of 2027 and return to around target towards the end of 2027. What to watch next is whether the digital euro regulation is adopted before the year ends.