Stablecoins raise the stakes

Cipollone’s anxiety hardened in February 2025 when a seven-hour hardware failure froze the ECB’s TARGET2 system, delaying settlement of more than €3 trillion in wholesale payments. The next week, Parliament’s ECON committee grilled ECB staff on whether that kind of glitch could sink public confidence in a CBDC. Dollar-backed coins such as USDC and PayPal USD, lawmakers noted, advertise “five-nines” uptime and could capture European e-commerce flows if Brussels dithers.

Europe already owns a fast rail — just not enough wallets

Technically, the rails exist.

The TARGET Instant Payment Settlement platform — better known as TIPS — has been live since 2018 and can already process 2,000 transactions per second, with headroom to scale higher. In wholesale markets, the consolidated TARGET2/T2 system routinely clears between €3 trillion and €4 trillion every business day and peaked at €4.7 trillion on 20 March 2023.

What Europe lacks is a mass-market wallet that sits on top of those rails. That gap is beginning to close. The European Payments Initiative — a consortium of 16 major banks — soft-launched its peer-to-peer wallet Wero in Germany, France, and Belgium last year, with plans to add online checkout in 2025 and point-of-sale NFC in 2026. Regulators quietly hope that by the time the digital euro arrives, Wero (and local champions like France’s Paylib or Spain’s Bizum) will be able to present a unified front against U.S. card wallets and dollar-denominated crypto.

The merchant math: fees, speed and leverage

Europe’s domestic schemes already give a taste of the economics on offer. In France, Cartes Bancaires charges merchants roughly 0.3 % interchange on debit transactions—less than a quarter of what many small stores pay when a foreign card is routed through Visa. Instant account-to-account payments settled in central bank money could push fees even lower, because there is no card network or issuing bank to reward.

The new Instant Payments Regulation strengthens that leverage: from 9 January 2025, euro-area providers must charge the same or less for a 10-second transfer as for an ordinary SEPA credit. For merchants, that means paying a flat few euro-cents on an instant “pull” payment instead of absorbing a 1–2 % card fee.

Speed alone is not the end game. The ECB’s April 2025 technical note promises that the digital euro rulebook will be published royalty-free so private wallets can “reuse” the acceptance standards. That gives fintechs room to build loyalty points, buy-now-pay-later offers or programmable payroll on top of ECB-cleared money — features that card networks currently reserve for themselves.

In other words, once the rails are real-time and the asset at the core is public money, Europe’s payments stack looks less like Visa and more like an open-source platform. That, insiders argue, is the only model that prevents the next wave of commerce — whether metaverse subscriptions or machine-to-machine micro-transactions, from defaulting to tokens priced in dollars.

The geopolitics of settlement bandwidth

Washington’s renewed fight over sanctioning crypto “mixers” such as Tornado Cash and Beijing’s fast-expanding e-CNY retail pilots have not gone unnoticed in Brussels. Authorities frame the digital-euro rail as vital for “preserving Europe’s strategic autonomy towards non-European private providers.” 

If Europe cannot clear its own money at internet speed, he argues, it will end up renting U.S. rails — whether card, crypto or cloud. That warning, once abstract, now resonates with centrist MEPs after euro-area inflation cooled to 2.2 % in March 2025, giving lawmakers room to prioritise competitiveness over crisis optics.

What could still go wrong

The timetable is tight. Under the EU’s Instant Payments Regulation, euro-area payment-service providers must be able to receive 10-second transfers no later than 9 January 2025 and send them by 9 October 2025. A RedCompass Labs survey of 200 European payment executives found that 58% of institutions without an instant-payment offer already doubt they will hit the first deadline.

The European Central Bank, meanwhile, hopes to move from its current two-year “preparation phase” to a limited digital-euro pilot as soon as legislation is in place — a step board member Piero Cipollone says could come “shortly after” a parliamentary vote in late 2025.

Integration testing must span more than 5,300 EU credit institutions, many of which still depend on mainframes running decades-old COBOL code — industry analysts estimate that roughly 40 % of global banking cores rely on COBOL.
Retrofitting those batch systems for real-time clearing is anything but trivial.

The political margin for error is also shrinking. After February’s seven-hour TARGET2 outage, German MEP Markus Ferber warned: “People will ask legitimate questions how the ECB will be able to run a digital euro when they cannot even keep their day-to-day operations running smoothly.”

If public rails slip, card networks and dollar-backed stablecoins will be ready to step in.

So, here’s the deal:

If Brussels hits its self-imposed deadlines, the phrase “card fee” could soon feel as quaint as “roaming charge.” If it misses them, French bakeries and Finnish gaming studios might find themselves settling invoices in dollar-linked tokens by default. For now, the technology is proven, the rule-book is drafting, and the politics—inevitably—are the last mile.