Cash remains the only means of payment that enables direct, in-person transactions with immediate settlement and without the involvement of third parties or electronic equipment. As payment habits evolve and demand grows for secure and trusted digital solutions, the European Central Bank (ECB) launched in 2021 an investigation phase into the potential introduction of a central bank digital currency for Europe — the digital euro.

A digital euro would constitute central bank money in digital form, made available to citizens and businesses for everyday retail payments, alongside euro banknotes and coins.

Legislative Framework: Commission Proposal

While the decision to issue a digital euro ultimately lies with the ECB, its introduction requires a clear legal framework. On 28 June 2023, the European Commission presented a comprehensive digital euro package.

The proposal aims to establish a harmonised regulatory framework governing the digital euro across the euro area. It would create a new, digital form of central bank money, ensuring consistent rules and conditions for its use in all participating Member States.

ECB Progress: From Investigation to Preparation

On 18 October 2023, following the completion of a two-year investigation phase, the ECB moved the project into a preparation phase. During this stage, the ECB:

• Refined the digital euro’s design and distribution model

• Advanced work on a scheme rulebook

• Selected providers for key technical components and services

• Operated an innovation platform

• Assessed integration into the broader payments ecosystem

In October 2025, the ECB concluded the preparation phase. It also provided co-legislators with:

• Investment cost estimates for the euro-area banking sector

• Technical assessments of potential financial-stability implications

• A report outlining the needs and expectations of citizens and merchants

European Parliament: Key Amendments and Policy Debate

Within the European Parliament, the proposal was assigned to the Committee on Economic and Monetary Affairs (ECON).

Initially, Stefan Berger (EPP) was appointed Rapporteur and presented a draft report in February 2024. Following his resignation in December 2024, Fernando Navarrete Rojas assumed the role.

The current draft report introduces significant changes compared to the Commission’s original proposal:

1. Clear distinction between offline and online digital euro

• The offline digital euro would function as a tokenised version of cash, enabling device-to-device payments without reliance on ECB settlement infrastructure. It would be introduced immediately and designed to ensure privacy, resilience, and usability during network disruptions.

• The online digital euro — account-based and relying on ECB-operated settlement systems — would only be introduced if no suitable pan-European sovereign retail payment solution emerges.

2. Stronger privacy safeguards
The offline version would closely replicate the privacy characteristics of physical cash by avoiding ledger-based settlement. Separate AML/CTF-related limits would apply.

3. Prescriptive holding limits
The draft limits the ECB’s discretion by requiring the Commission to establish holding ceilings through delegated acts, based on ECB financial-stability assessments.

• Downward revisions could be made via delegated acts.

• Upward revisions would require a full legislative procedure.

• Additional safeguards could be introduced to protect financial stability or address AML/CTF concerns.

• A general restriction on holdings by natural persons is introduced, except in force majeure situations caused by temporary network disruptions.

4. Compensation framework adjustments
The draft clarifies fee structures and includes a ten-year review clause, allowing for a potential shift toward a cost-based compensation model if deemed more efficient.

Council Position: Safeguards and Stability

In December 2025, the Council adopted its negotiating mandate on the digital euro package. The Council supports introducing an ECB-backed public digital means of payment that would complement both cash and private solutions.

Key elements of the Council position include:

• Functionality both online and offline

• ECB-set holding limits within a Council-defined ceiling

• Free basic services for users

• Regulated fees for additional services

• Fair access to mobile devices for payment providers

• A capped-fee transitional regime, followed by cost-based pricing

The Council’s approach emphasises strong safeguards for financial stability, consumer protection, and market fairness.