The European Parliament's Committee on Economic and Monetary Affairs has approved its draft negotiating position on legislation governing the launch of the digital euro, marking a significant step toward creating a digital version of the single European currency. The vote, held on June 24, 2026, saw 43 members in favor, 14 against, and one abstention, as part of a broader legislative package concerning the future of the European Union's monetary system.
Key Provisions of the Draft Law
The proposed legislation aims to establish a public digital payment method accessible to all residents of the euro area, thereby reducing dependence on international payment card networks. Under the plan, online payments would be processed through an account-based system, while offline payments would rely on local storage devices such as cards or mobile wallets.
Banks and financial technology companies would be responsible for distributing the digital euro, which would be available for both electronic and direct payments across all euro area countries. The European Commission would set a maximum limit on the amount of digital euro an individual may hold, based on a recommendation from the European Central Bank. This limit would be reviewed at least once every two years.
Measures to Protect Bank Deposits
The text includes provisions to limit the transfer of deposits from commercial banks to the digital currency, aiming to prevent potential bank runs or destabilization of the banking sector. Companies would not be permitted to hold digital euro balances for more than 24 hours, and the digital currency would be non-interest-bearing and free of charge for users.
According to the committee, the digital euro is designed as a complement to cash, not a replacement. The European Central Bank has emphasized that the digital euro would offer a secure and private means of payment, with offline transactions providing a level of anonymity similar to cash.
Next Steps in the Legislative Process
Subject to no objection from the European Parliament's plenary session, negotiations are expected to begin next month between the Parliament, the Council of the European Union, and the European Commission. The European institutions aim to adopt the final legislation before the end of the year.
Once adopted, the digital euro would become the first central bank digital currency (CBDC) issued by a major central bank in a large currency area. The move follows years of research and pilot projects by the European Central Bank, which has been exploring the feasibility of a digital euro since 2021.
Impact on the Financial System
Supporters of the digital euro argue that it would enhance the resilience of the European payment system, reduce transaction costs, and foster financial inclusion. Critics, however, have raised concerns about privacy, the potential for excessive state surveillance, and the risk of disintermediating commercial banks.
The committee's approval is seen as a crucial milestone, bringing the digital euro closer to reality. The European Commission has stated that the digital euro would be a key element in modernizing the European economy and ensuring that the euro remains fit for the digital age.
