EU moves closer to digital euro as parliament backs key framework amid push to curb US payment dominance
The proposed digital euro — a central bank-guaranteed electronic wallet that would be distributed through commercial banks and fintech firms — is intended to allow eurozone residents to make payments both online and in physical stores, while reducing reliance on US-based card networks such as Visa and Mastercard
BONN, June 24, 2026 — The European Union [EU] has taken a significant step towards introducing a digital euro after the European Parliament’s economic committee gave its backing to draft legislation designed to pave the way for a central bank-backed digital payment system across the euro area.
The proposed digital euro — a central bank-guaranteed electronic wallet that would be distributed through commercial banks and fintech firms — is intended to allow eurozone residents to make payments both online and in physical stores, while reducing reliance on US-based card networks such as Visa and Mastercard.
The push has gathered momentum in recent years, particularly following heightened geopolitical tensions and concerns in Europe about overdependence on foreign payment infrastructure. Supporters argue that a sovereign digital payment option would strengthen the eurozone’s financial autonomy at a time of increasingly strained transatlantic relations.
The European Central Bank [ECB] has spent around six years developing the concept, which has gained urgency since Donald Trump’s return to the White House and the reintroduction of tariffs on key trading partners, including the EU. Policymakers have also raised concerns that the United States could one day leverage its dominance in global payment systems for political influence.
Under the proposal, the digital euro would function as a widely accessible electronic means of payment, while being issued and backed by the ECB. The system would still be distributed through private-sector intermediaries such as banks and fintech companies.
“The introduction of the digital euro would… reduce overreliance on non-European providers by becoming a pan-European means of payment and would bring the single currency into the digital era,” the draft regulation states, adding that it would allow citizens to use central bank money in everyday transactions.
Political compromise shaping design
Lawmakers have introduced safeguards aimed at easing concerns from the banking sector, which has warned that a digital euro could trigger deposit outflows and reduce lending capacity.
Under the draft framework, the European Commission would set limits on how much digital euro an individual can hold, based on recommendations from the ECB, with those thresholds reviewed at least every two years. Businesses would be required to convert holdings within 24 hours, and the currency would not earn interest.
Siegbert Frank Droese, of the far-right Europe of Sovereign Nations group in the European Parliament, said his bloc had voted against the proposal, suggesting further debate would be required at plenary level.
Negotiations are expected to begin next month between the Parliament, the European Council of EU governments, and the European Commission, with a target of final approval by the end of the year, provided no major objections arise.
The ECB plans to run a 12-month pilot programme from the second half of next year, ahead of a potential full rollout in 2029.
Banking sector concerns remain
Despite political progress, tensions remain over the potential impact on financial stability. ECB modelling suggests that, under a €3,000 holding limit, up to €699 billion could be withdrawn from eurozone banks — equivalent to about 8.2% of retail sight deposits. Smaller banks and retail lenders are expected to be most exposed.
Laura Casonato, head of policy at Positive Money Europe, said the proposal reflects political compromise, keeping commercial banks central to distribution while limiting the role of public infrastructure.
Cost debates and competing systems
Auke Zijlstra of the far-right Patriots for Europe group said discussions in the coming negotiations would likely focus on compensation for implementation costs, estimated by the ECB at between €4 billion and €6 billion over four years.
However, he warned the project risked becoming outdated before launch, pointing to private-sector innovations such as Wero, an instant payments platform developed by a consortium of European banks.
Damian Boeselager of the Greens argued that any new system should remain affordable for merchants, many of whom may be required to accept the digital euro. The Parliament’s draft includes exemptions for small businesses and self-employed traders.
Global context
Europe’s move comes as China continues large-scale trials of a digital yuan, while countries including India and Brazil have launched their own experiments. In contrast, the United Kingdom is still in the research phase, citing concerns over privacy and financial stability, while US President Trump has ruled out a Federal Reserve-issued digital currency.
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