ECB admits euro cash remains indispensable as demand averages over 2% annual growth

After leveling off during interest rate hikes, demand for cash in the eurozone is growing strong again, currently at an annual rate of 2.3%, the European Central Bank (ECB) has recognized.

The acknowledgment comes with a new attempt to alleviate fears that the digital euro will replace traditional banknotes and coins that the majority of Europeans want to keep as a payment option.

€5,000 worth of banknotes per capita circulating in the euro area

Banknotes and coins will continue to play a crucial role, both as a means of payment and store of value, according to Piero Cipollone, member of the ECB’s Executive Board, who published a blog post on Monday devoted to the future of paper and metal money in the eurozone.

Euro bills in circulation exceed 30 billion, with their total value reaching €1.6 trillion ($1.85 trillion), the official highlighted in his article. He continued by explaining why paper money is still indispensable and how the monetary authority is working to ensure it remains available in the common currency area.

“After plateauing when we raised interest rates – which made it less attractive for people to hold large of 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,” Cipollone detailed, elaborating:

“To put it into perspective: almost €5,000 worth of banknotes are currently in circulation for each euro area citizen.”

To back the quoted figures, the ECB executive referred to a chart indicating that euro banknotes circulating in the eurozone economy have been increasing since early 2024 and are now nearing the all-time high set in 2022.

With the exception of the Covid-19 years when digital payments spiked, paper euros have been multiplying since the financial crisis of 2008, when their value was a little over €600 billion.

According to a survey conducted by the ECB in 2024, having the option to pay with cash remains very or fairly important for some 62% of the euro area population. That majority has expanded by 2 percentage points over the 2022 poll.

Piero Cipollone noted:

“Europeans want to retain the option to pay with cash, so they expect it to remain available in the future … Cash is also used as a store of value and demand for it has stayed strong across age groups.”

Cash to remain relevant, especially in times of crisis

Besides the surge of non-cash payments, boosted by the pandemic, the upcoming digital euro has also fueled concerns about the future of physical notes on the Old Continent.

This past spring, ECB President Christine Lagarde announced that the monetary policy regulator aims to finalize preparations for the new coin’s launch by October 2025.

The European Central Bank and the European Commission have been developing strategies to preserve euro cash and adapt it to the future, Cipollone remarked.

Among them, he listed the Legal Tender of Cash Regulation, designed to protect the status of euro banknotes and coins as a means of payment, and the Digital Euro Regulation.

The two legislative proposals should ensure that Europe’s central bank digital currency will complement rather than replace European cash, “enhancing the range of payment options available by offering cash in both physical and digital forms.”

This will strengthen Europe’s autonomy in payments, the ECB board member is convinced. Cash will remain “highly relevant” and continue to exist alongside other payment methods, he added.

Cipollone also pointed to the importance of keeping cash available in times of emergencies when its alternatives are unable to completely replace it in certain respects.

“The recent power blackout in the Iberian Peninsula once again demonstrated that cash, being independent of technology, can always be relied on,” he highlighted.

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