They didn't start to work on this digital euro to compete with cryptocurrencies. They perfectly know the difference between a digital coin and crypto and know very well that people interested in cryptocurrencies is just a speculation matter. This won't be the case with a digital euro coin.
They did it as an innovation in digital payments means and to avoid being dependent on certain networks. By networks, I mean some companies like Visa and Mastercard
That was part of my point but I'm guessing that its not only about credit/debit card companies but also payment processors such as Paypal and cryptocurrencies as well. The European Central Bank was happily co-existing with these payment methods before the emergence of cryptocurrencies and now they are only acting when the crypto market has started gaining traction in the EU. I'm guessing that this is their way of silently "regulating" money transfers while they aren't doing any kind of stricter enforcement in the crypto industry.