After much delay and political wrangling, the European Parliament’s Economic and Monetary Affairs Committee has approved its position on the proposed legal framework for the digital Euro, moving the project closer to negotiations with EU governments. The digital Euro will provide a public European payment option and reduce dependence on non-EU payment providers.
The committee adopted the digital Euro file by 43 votes to 14, with one abstention. Parliament’s negotiating mandate still has to be confirmed in plenary, and the final law must be negotiated with the Council before entering into force. Rapporteur Fernando Navarrete Rojas said the package protects citizens’ freedom to choose how they pay, while ensuring that cash remains available and that central bank money is also usable in digital form.
According to the text backed by MEPs, the digital Euro would work both online and offline. Offline payments would function through local storage devices, making them similar to cash. If the device were lost, the offline money stored on it would also be lost.
MEPs also backed privacy safeguards. The system would be based on privacy-by-design and privacy-by-default principles. 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.
Basic services would be free of charge. These include opening an account, holding and managing funds, and receiving at least one payment instrument. Payment service providers could charge for additional services, but offline payments would be free, while merchant and inter-provider fees would be capped.
The digital Euro would be distributed by banks and other payment service providers, including e-money providers, post offices and regulated crypto-asset providers. Most businesses would have to accept it, with exceptions for the self-employed and small or micro-enterprises that do not accept other digital payments.
According to the committee, to protect financial stability, individuals would face limits on how many digital Euros they can hold. The ceiling would be set by the European Commission on the basis of ECB recommendations and reviewed at least every two years. Businesses would not be allowed to hold digital euros except temporarily, for up to 24 hours, to collect incoming payments. The digital Euro would not pay interest.
The introduction of the digital Euro has become more urgent as US sanctions against International Criminal Court officials have shown how access to payment systems can be affected by decisions taken outside Europe. ICC judges and prosecutors sanctioned by the United States have reported being cut off from bank cards, online services and basic transactions.
The next step is for Parliament’s negotiating mandates to be announced at the July plenary session. If confirmed, Parliament will begin negotiations with the Council on the final legislation.
You can read the press release here and draft bill here.
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