European Parliament committee backs digital euro draft rules

The European Parliament's committee on economic and monetary affairs voted on Tuesday to approve the draft regulation that would create a digital euro, the most concrete step yet toward a central bank digital currency for the eurozone. The vote follows three years of negotiation between the European Central Bank, the European Commission and national governments, and it came after sustained lobbying from commercial banks that warned of deposit flight and billions in implementation costs.

A geopolitical project as much as a monetary one

The digital euro has always been framed as a response to the dominance of US-owned payment networks. Visa, Mastercard, Apple Pay and Google Pay together process nearly two-thirds of all card transactions in the eurozone, according to ECB figures. Thirteen of the 21 eurozone member states have no domestic card scheme of their own. That dependence became politically acute after Washington imposed sanctions on International Criminal Court judges in 2025, cutting off French judge Nicolas Guillou's access to his Visa card. The episode was cited repeatedly in Brussels as proof that payment infrastructure is, in the words of centrist MEP Gilles Boyer, "not neutral" but "instruments of power".

Boyer, who sits with the Renew Europe group, said in a statement after the vote: "We, Europeans, have had many wake-up calls about our dependence on the US. We're fully awake now." The sentiment reflects a broader shift in EU thinking since the return of an "America First" agenda in Washington, which has accelerated work on strategic autonomy across defence, technology and now money.

How the digital euro would work

Under the approved text, a digital euro would be a direct liability of the Eurosystem, held in a separate virtual wallet rather than a commercial bank account. Users would open an account with a bank or a public institution such as a post office, fund it by transfer or cash deposit, and spend it in shops, online or peer-to-peer using a card, phone app or the banking app they already use. The currency would have the same value as banknotes, carry no interest, and be free for consumers.

Businesses would not be permitted to hold digital euros for longer than 24 hours, a provision designed to prevent the instrument from becoming a corporate treasury tool. The European Commission would set a ceiling on individual holdings based on an ECB recommendation, and review that ceiling at least every two years. The ECB has said the limit would be calibrated to avoid large-scale deposit substitution while still allowing the digital euro to function as a practical means of payment.

Privacy design and the offline option

Privacy has been a central selling point. The regulation requires that the Eurosystem cannot identify the parties to a transaction. An offline mode would allow proximity payments without an internet connection, offering a level of confidentiality comparable to cash. Alessandro Giovannini, adviser to the digital euro director at the ECB, said: "It wouldn't replace anything. Cash would still be available, and people could use existing private payment methods." He added that the digital euro would "give people more choice and allow consumers to preserve their freedom to choose how to pay, as daily life becomes more digital".

The offline capability is technically ambitious. It requires a secure element on the user's device that can validate transactions without contacting the central ledger, while still preventing double-spending. The ECB has been testing prototypes since 2023, but the committee's text leaves detailed technical standards to implementing acts that will be adopted after the regulation enters into force.

Banking sector resistance and the cost dispute

Commercial banks have been the project's most vocal critics. The European Banking Federation published a report in April estimating that adapting core banking systems, distribution channels and compliance frameworks would cost the sector €18 billion. The ECB disputes that figure, putting the investment cost between €4 billion and €6 billion. The gap reflects different assumptions about the scope of changes required: the federation counts front-end redesign, customer onboarding and ongoing operational overhead, while the ECB focuses on the infrastructure modifications needed to connect to the Eurosystem's settlement layer.

Beyond cost, banks fear deposit outflows. If customers move savings into a risk-free central bank liability, banks lose a stable funding source and may face higher wholesale funding costs. Giovannini argued that the holding limits and the 24-hour rule for businesses make large-scale substitution unlikely: "Thanks to its design that prevents large deposit outflows, the digital euro wouldn't cause these risks, even in extreme and unlikely crisis situations." The ECB has also committed to a tiered remuneration mechanism for banks that distribute the digital euro, though the details remain unresolved.

A further irritant for banks is Wero, the pan-European payment initiative launched by the European Payments Council in 2024. Some executives see the digital euro as a public competitor to a private sector project they have spent years building. The committee's text does not address this tension directly, but it does require the ECB to ensure interoperability with existing European payment solutions.

Timeline: pilot in 2027, launch in 2029

The ECB has said it is ready to begin a pilot programme in mid-2027, testing end-to-end flows with a limited set of banks, merchants and users. A full launch would follow by 2029, provided the regulation is adopted by the end of this year. That requires agreement between the Parliament's plenary and the Council of the EU in trilogue negotiations, which typically take several months. The Council has not yet finalised its position; finance ministers are expected to discuss the file at the Ecofin meeting in July.

If the legislative process slips into 2027, the pilot and launch dates would likely shift. The ECB has warned that a delayed legal framework would undermine the project's credibility and give non-European payment providers more time to entrench their position. The Commission, for its part, has signalled it wants the regulation on the statute books before the next European elections in 2029.

What the committee changed from the Commission proposal

The Parliament's negotiating mandate tightens several provisions. It strengthens the privacy guarantee by explicitly banning any processing of personal data for commercial purposes. It requires the ECB to publish an annual report on the digital euro's impact on financial inclusion, a response to concerns that a digital-only instrument could exclude elderly or digitally marginalised citizens. And it adds a clause obliging the Commission to assess, within three years of launch, whether the holding limits remain appropriate or should be adjusted.

The committee also inserted a safeguard for financial stability: if the ECB identifies a risk of excessive deposit outflows, it may temporarily lower the individual holding ceiling without waiting for the biennial review. That provision was a direct concession to banking groups, though the federation said it does not go far enough.