EU Parliament Committee Approves Legal Framework for Digital Euro Launch

The European Parliament’s Economic and Monetary Affairs Committee has approved its position on a single currency package, clearing a major legislative hurdle for the creation of a digital euro. The vote, which passed 43 to 14 with one abstention, establishes the legal basis for an electronic form of money issued by the European Central Bank (ECB).

The proposed digital currency will feature both online and offline capabilities. Online transactions will operate through an account-based system, while offline payments will utilize local storage devices. Lawmakers noted that offline funds will function similarly to physical cash, meaning that if a device is lost, the money cannot be refunded.

EU lawmakers view the project as a geopolitical necessity to decrease the eurozone's dependence on non-European payment providers, such as Mastercard, Visa, and PayPal. Currently, US-based providers process nearly two-thirds of card payments in the eurozone. By creating a pan-European payment option, the EU aims to strengthen its monetary sovereignty and resilience.

To maintain financial stability and prevent deposit outflows from banks, the legislation includes a cap on the amount of digital euros an individual can hold. The European Commission will set this ceiling based on ECB recommendations, with reviews occurring at least every two years. Additionally, businesses will be prohibited from holding the currency for more than 24 hours to prevent it from being used as a store of value.

Privacy and accessibility are central to the proposal. The digital euro is intended to complement rather than replace physical cash, and the package includes protections to ensure the continued acceptance of banknotes and coins. The system will be free of charge for consumers and will not earn interest.

The ECB plans to conduct a 12-month pilot starting in the second half of next year, followed by a roll-out period of at least 24 months. A full launch is targeted for 2029. Before the launch, the ECB must finalize a rulebook, build the necessary infrastructure, and establish liability rules to address risks such as double-spending in offline transactions.

The project now moves toward a full parliamentary vote and subsequent negotiations with the European Commission and member states. EU economy commissioner Valdis Dombrovskis expressed hope that the legislative process could be finalized by the end of the year.