The European Parliament’s Committee on Economic and Monetary Affairs has approved its negotiating position on legislation creating a digital euro, moving the European Union one step closer to launching a central bank digital currency designed to strengthen Europe’s payments sovereignty while preserving privacy and financial stability.
MEPs voted 43-14 in favour of the proposal, which would establish a digital euro as an electronic form of central bank money that complements cash rather than replaces it. The committee also backed related legislation governing distribution in non-euro member states and reaffirming the legal tender status of euro banknotes and coins.
The vote marks another milestone in one of the world’s most advanced central bank digital currency projects as governments seek to reduce dependence on global payment networks while responding to the rise of digital payments, stablecoins and tokenised finance.
Privacy Takes Centre Stage
Privacy has been one of the biggest political obstacles facing the digital euro, and lawmakers sought to address those concerns by embedding privacy protections directly into the legislation.
The proposal requires the digital euro to follow “privacy by design” and “privacy by default” principles. Advanced cryptographic technologies, including zero-knowledge proofs, would allow transactions to be verified without revealing unnecessary personal information. The European Central Bank would not have access to users’ personal identification data.
The digital euro would support both online and offline payments. Offline transactions would function similarly to cash by allowing payments directly between devices without an internet connection. However, as with physical cash, users would bear the risk of losing offline funds if the storage device were lost or damaged.
Holding Limits Aim To Protect Banks
Financial stability remains a key concern for policymakers, particularly the possibility that consumers could move large amounts of deposits from commercial banks into risk-free central bank money during periods of market stress.
To address that risk, MEPs support limits on how many digital euros individuals can hold. Under the committee’s proposal, the European Commission would determine the holding limit based on recommendations from the ECB, with Parliament receiving full decision-making powers and reviews taking place at least every two years.
Businesses generally would not be permitted to hold digital euros beyond retaining incoming payments for up to 24 hours. The legislation also confirms that digital euro balances would neither earn interest nor incur charges, reducing incentives for large-scale shifts away from traditional bank deposits.
Banks, Payment Firms And Crypto Providers Could Distribute The Digital Euro
The proposal adopts a broad distribution model that would allow banks, electronic money institutions, post offices and regulated crypto-asset service providers to offer digital euro services across the European Union.
Most merchants accepting electronic payments would also be required to accept the digital euro, although exemptions would apply to self-employed individuals and smaller businesses that do not currently accept digital payments.
Basic services, including opening an account, holding funds and accessing at least one payment instrument, would be provided free of charge. While payment service providers could charge for optional services, lawmakers proposed caps on merchant fees and inter-provider charges, with offline payments remaining entirely free.
ECB Must Complete Testing Before Launch
Before any public rollout, lawmakers want the ECB to complete a detailed implementation programme that includes a comprehensive rulebook, technical infrastructure, liability arrangements and real-world pilot testing.
Particular attention would be given to risks associated with offline payments, including preventing double-spending. Once authorised, the digital euro would not launch immediately. Instead, a minimum 24-month implementation period would allow banks, payment providers, merchants and consumers to prepare while governments conduct public awareness campaigns.
The committee also stressed that the ECB’s operational responsibilities for the digital euro should remain separate from its monetary policy functions.
Cash Protections Remain Alongside The Digital Euro
Alongside the digital euro legislation, lawmakers also approved rules designed to preserve access to physical cash.
The proposal would require euro area member states to maintain adequate access to cash and prepare contingency plans for digital payment outages. Businesses generally would not be permitted to refuse cash through blanket “no cash” policies, while governments would be required to monitor cash availability, particularly for elderly people, lower-income households and financially vulnerable citizens.
The committee also backed legislation allowing banks and payment providers from non-euro EU member states to distribute the digital euro under the same framework, while giving the ECB authority to restrict access where necessary to protect national currencies.
Takeaway
The committee vote does not create the digital euro, but it moves the project into the next stage of the legislative process. By combining privacy protections, holding limits and mandatory cash safeguards, lawmakers are attempting to balance digital innovation with financial stability. Negotiations with EU member states will determine the final framework before any digital euro can be introduced across the bloc.
