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CBDC

CBDC Insights: Digital Euro and Japan’s Approach

Norbert Gehrke

Norbert Gehrke

— 7 min read
CBDC Insights: Digital Euro and Japan’s Approach

The Deutsche Bundesbank Representative Office, jointly with Japan's Ministry of Finance and the Bank of Japan, held an event titled "CBDC Insights: Digital Euro and Japan's Approach" on Thursday, September 11, 2025, on the occasion of Burkhard Balz's visit, the board member responsible for cash management, payments and settlement systems, the digital Euro, and the Centre for International Central Bank Dialogue. Overall, we identified the following key takeaways:

  • Strategic Autonomy is a Core Driver for Europe: A primary motivation for the Digital Euro is to reduce Europe's heavy reliance on non-European (primarily US-based) payment providers, which process approximately 60% of the region's card payments. The Digital Euro aims to provide a sovereign, resilient, and pan-European payment infrastructure.
  • Coexistence, Not Replacement: All speakers emphasized that a retail Central Bank Digital Currency (CBDC) is intended to be a "digital twin of cash" that coexists with physical cash and private payment solutions, not replace them. It aims to ensure that public money remains an anchor in an increasingly digital financial system.
  • Public-Private Partnership is Essential: Both the European and Japanese projects are structured as a "happy marriage" between the public and private sectors. Central banks will issue the CBDC and manage the core ledger, while private intermediaries (like banks and payment service providers) will handle distribution, customer-facing services (wallets, apps), and KYC/AML obligations.
  • Key Design Challenges are Universal: Both projects are grappling with the same core design challenges: ensuring user privacy while complying with anti-money laundering regulations, and implementing safeguards (like holding limits) to prevent bank disintermediation and ensure financial stability.
  • Japan's Focus is on Addressing Fragmentation and Cost: While Europe's push is largely strategic, Japan's exploration of a CBDC is also driven by the need to address a fragmented domestic payment landscape (with many competing QR codes and loyalty schemes) and the high cost of card payments for small merchants.
  • Cross-Border Interoperability is a Long-Term Goal: While the initial focus is on domestic retail use, all parties see the potential for CBDCs to make cross-border payments more efficient. This will require significant international coordination on technical standards and policy frameworks, with projects like the BIS's Project Agora being a key step.

From here, we provide a deeper dive into the individual presentations and the panel discussion.

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