On Tuesday, the European Parliament's Economic and Monetary Affairs Committee gave its approval to the long-anticipated digital euro, a move designed to strengthen the bloc's financial sovereignty and reduce its reliance on payment infrastructure dominated by the United States.
According to data from the European Central Bank (ECB), US giants Visa and Mastercard currently handle 61% of card payments within the euro area and nearly all cross-border card transactions. This dependence has become a growing concern amid rising geopolitical tensions and debates over Europe's strategic autonomy.
A Digital Complement to Cash
The digital euro would be a central bank digital currency (CBDC) issued and backed by the ECB. It is intended to complement, not replace, physical cash and existing banking services. Consumers would be able to hold digital euros in a dedicated wallet, subject to a yet-to-be-determined holding limit. The system would support both online and offline payments and is designed to offer a high degree of privacy, with the ECB unable to directly identify users from their payment data.
The ECB will provide the underlying infrastructure, while commercial banks and payment service providers will offer digital euro services to customers. Financial institutions are expected to be compensated for their participation, and merchants will pay fees that are anticipated to be lower than those for current card transactions. However, the structure of this compensation remains one of the most contentious issues ahead of negotiations with EU member states, according to three sources familiar with the discussions.
“We welcome that the European Parliament's ECON Committee has agreed on its position on the single currency package, which will safeguard euro cash as legal tender while also shaping the digital euro,” the ECB said in a statement.
Italian MEP Pasquale Tridico, who negotiated the file on behalf of The Left group, described the vote as “historic” and called the approval “a major victory for citizens and small businesses.”
Global Context and Competition
The European Union is not alone in pursuing a public digital currency. China has already introduced its digital yuan, and Russia has announced that its digital rouble will become operational in September 2026. The United States, under President Donald Trump, has abandoned plans for a Federal Reserve-issued CBDC and instead backs stablecoins—privately issued crypto assets designed to maintain a stable value. Since most global stablecoins are denominated in US dollars, supporters argue this could reinforce the dollar's international role. Nevertheless, some policymakers, including former CFTC chairman Timothy Massad, believe a US CBDC may eventually return to the agenda.
The digital euro initiative also aligns with broader European efforts to reclaim digital control, as seen in discussions at events like the Web3 Summit in Berlin, where reclaiming digital sovereignty from Big Tech was a key theme.
Next Steps
The European Parliament is expected to formalise the committee's position during a plenary vote in Strasbourg in early July. Negotiations with the EU's 27 member states would then begin, with lawmakers aiming to reach a final agreement before the end of the year. The digital euro is projected to launch by 2029.
