The EU has taken yet another step toward the introduction of a digital euro. On Thursday, the European Parliament gave the green light to start crucial negotiations with member states on the legislation needed to make the digital currency possible.
The decision does not mean that the digital euro will be introduced immediately, but marks that the project is now entering perhaps its most important phase. The upcoming trilogue negotiations between the European Parliament, the Council of Ministers, and the European Commission will determine the final design of the regulations.
The main motivation from the EU’s side is no longer solely about technological advancement. With growing geopolitical tensions, the digital euro has come to be described as a strategic tool to strengthen Europe’s economic autonomy. EU policymakers point out that the European payments market is currently dominated by American players such as Visa, Mastercard, PayPal, and Apple Pay – a dependency they want to reduce.
The digital euro will be issued by the European Central Bank (ECB) and function as a digital complement to cash and coins. Unlike cryptocurrencies such as Bitcoin, it will be an official central bank currency with the same value as the regular euro, and can be used for everyday payments, both in stores and online.
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A recurring concern among critics has been that digital central bank money could eventually pave the way for a cashless society. The European Parliament therefore emphasizes in its negotiation stance that the digital euro should not replace cash, but exist alongside it. The Parliament also wants to strengthen the protection of the right to use cash and coins within the union.
Privacy has also been one of the most debated parts of the project. Critics have warned that a digital currency administered by a central bank could in theory give authorities greater insight into citizens’ payment patterns. The ECB has dismissed these concerns and emphasizes that the system will be built with strong privacy safeguards.
Among other things, certain payments can be made offline, which according to the central bank will provide a higher degree of privacy.
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The banking sector has also expressed concerns. If individuals choose to move large sums from traditional bank accounts to digital euro, it could affect banks’ financing and their ability to lend money to households and businesses. To reduce this risk, the ECB has previously proposed limits on how much individuals can hold in digital euro.
The project has been in development for several years. The ECB began its preparation phase in the fall of 2023, and since then both the technical solutions and legal framework have been developed. Thursday’s decision means that the legislative process now moves forward to final negotiations between EU institutions.
If the European Parliament and member states can agree on the legislation, a final decision from the ECB remains on whether the digital euro will be launched. According to the central bank’s current timetable, an introduction could be possible toward the end of the decade.
The issue has meanwhile grown much larger than a technical payment solution. For supporters, the digital euro is about strengthening Europe’s economic sovereignty in a time of increased geopolitical uncertainty. For critics, it instead raises questions about personal privacy, the role of the state in the financial system, and how far the digitization of money should go.