Against the backdrop of an increasingly conflict-driven international environment, physical money is making a comeback in Eastern Europe as countries prepare for cyber attacks, payment restrictions and blackouts. This development has highlighted a structural weakness of the euro area, which, so long as it does not have its own digital payment system, still depends on the US currency. In a time of pronounced geopolitical tensions between Europe and America, this could be very costly indeed.

The new debate about the role of cash in emergencies was kicked off earlier this month by Estonia’s central bank, which recommended that citizens keep a stockpile of cash in their homes sufficient to a week’s worth of expenditure in case of payment system failures or power cuts. Then, in an interview with Polsat News this week, Polish Finance Minister Andrzej Domański embraced the idea of keeping a stash of physical money. Cashless payments are on the rise, with roughly 70-80% of Poles paying through cards or mobile phones. Yet Poland experienced a wave of cyber attacks and blackouts last year, and citizens are increasingly aware of the benefits of keeping cash just in case.

These proposals from Eastern Europe point to serious vulnerabilities in our payment systems. For Estonia, the threat from Russia is more real than it is for other European Union member states. Earlier this week, the Duma, Russia’s first chamber in parliament, passed a law explicitly allowing extraterritorial interventions to defend Russians who suffer legal discrimination abroad. There is also a large dependence on US payment operators such as Visa and Mastercard, which are involved in two-thirds of card transactions inside the euro area. These systems could be restricted in the event of geopolitical conflict, with major disruptions for the functioning of payments in Europe.

An independent digital payment system, then, looks like a strategic necessity. The EU has been making some progress in this respect, working on initiatives such as digital euros and central-bank digital money, which operates independently from private intermediaries. According to the European Central Bank, the first digital euro issue could take place in 2029 if all relevant EU regulations are adopted later this year.

There is no getting away from the fact that credit cards and digital payments are part of our modern financial world. Cash, meanwhile, is dismissed as the preserve of the elderly and those obsessed with data privacy. Now, however, its popularity is set to rebound as Europeans hedge against future escalations on the geopolitical stage.

This is an edited version of an article which first appeared in the Eurointelligence newsletter.