Digital euro proposal advances in European Parliament committee

Members of the European Parliament’s Economic and Monetary Affairs Committee have adopted their position on legislation to establish a digital euro, moving the EU closer to negotiations on a possible central bank digital currency.

The proposal would create a new electronic form of central bank money issued by the European Central Bank. It is intended to give citizens and businesses a secure digital payment option while reducing reliance on non-EU payment providers.

MEPs backed a model that would allow the digital euro to work both online and offline. Online payments would be processed through an account-based system, while offline payments would use local storage devices and operate similarly to cash.

The committee said privacy-by-design and privacy-by-default principles should be built into the system. Technologies such as zero-knowledge proofs would allow transactions to be verified without exposing personal data, and the ECB would not have access to users’ personal identification data.

Payment service providers, including banks, e-money providers, post offices and regulated crypto-asset providers, would be able to distribute the digital euro across the EU. Most businesses would be required to accept the digital euro, with exceptions for self-employed people and small and micro enterprises that do not accept other digital payments.

Basic digital euro services would be free. These include opening an account, holding and managing funds, and obtaining at least one payment instrument. Offline payments would also be fee-free.

To protect financial stability, individuals would face limits on the number of digital euros they can hold. Businesses would not be allowed to hold digital euros except to accumulate incoming payments for up to 24 hours, and the digital euro would not pay or charge interest.

The negotiating mandates for the digital euro files will be announced at the start of the July plenary session. Final legislation will still need to be negotiated with the Council before entering into force.

Why does it matter?

The ECON vote shows that the EU is still pursuing a sovereign digital payment infrastructure while trying to address concerns over privacy, financial stability and the future of cash. The proposal contrasts with growing resistance to CBDCs in the United States and other jurisdictions. Still, Parliament’s approach also shows caution: the digital euro would need holding limits, pilot testing, a long rollout period and strict separation from the ECB’s monetary policy functions.

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