Households and businesses could obtain the digital euro through a conversion from banknotes and/or bank deposits. Replacing banknotes with the digital euro would have no implications for banks, while switching from deposits to the digital euro would affect banks. The introduction of the digital euro is likely to trigger bank disintermediation and curtail the volume of bank credit to the economy if a significant substitution of bank deposits with the digital euro takes place. Banks’ funding would become more unstable and costly, affecting both their profitability and their lending capacity towards the economy. The impact of the digital euro on the euro area banking system is linked to the level of its take-up. Therefore, careful design and implementation is needed to control the adoption of the digital euro. The Eurosystem should place particular emphasis on the safeguards to control the take-up of the digital euro and prevent bank disintermediation. The safeguards should be calibrated in such a manner to strike the right balance between ensuring a substantial level of usage, which is necessary to achieve the policy objectives of the digital euro, and mitigating the risks for bank disintermediation and financial stability from a large and rapid take-up of the digital euro.