The European Parliament has formally adopted its negotiating stance on the digital euro, paving the way for intensive talks with EU member state governments. The vote, held in Strasbourg on Thursday, marks the beginning of the final phase of legislative negotiations on what would be a landmark digital currency issued by the European Central Bank (ECB).
What Is the Digital Euro?
The digital euro is conceived as an electronic form of central bank money, backed directly by the ECB. It is designed to complement, not replace, physical cash and existing commercial banking services. Consumers would be able to store digital euros in a dedicated wallet, subject to a holding limit that remains to be determined. The system would support both online and offline transactions, with a strong emphasis on privacy: the ECB would not be able to directly identify users from their payment data.
Under the proposed framework, the ECB would provide the underlying infrastructure, while commercial banks and payment service providers would handle customer-facing services. This division of responsibilities is intended to leverage the private sector's expertise while ensuring the currency's stability and trustworthiness.
Key Points of Contention
According to three sources close to the negotiations, the most delicate issue is the compensation model. Negotiators must decide which financial institutions should be compensated for offering digital euro services, how much they should receive, and how payments should be structured. Banks and payment providers are concerned about the costs of integrating the digital euro into their systems and want assurance that they will not be left out of pocket.
Another critical area is fee sharing across the payment chain. Merchants are expected to pay lower fees for digital euro transactions than they currently do for card payments, which could disrupt existing revenue streams for payment processors. The exact distribution of these fees—and who bears the cost—remains a subject of intense debate.
The negotiations are expected to intensify this autumn, with the European Parliament, the Council of the EU, and the European Commission aiming for final approval by the end of the year. The outcome will shape not only the digital euro's design but also its adoption across the bloc's twenty-seven member states, as well as in the wider European Economic Area.
The digital euro project is part of a broader trend among central banks worldwide to explore digital currencies. However, the EU's approach is distinctive in its emphasis on privacy and its attempt to balance public and private sector roles. The success of these negotiations could set a precedent for other regions considering similar initiatives.
As the talks proceed, stakeholders from Berlin to Paris will be watching closely. The digital euro has the potential to modernise Europe's payment infrastructure, but its final form will depend on the compromises reached in the coming months.
