The European Central Bank (ECB) has received support from the European Parliament’s Economic and Monetary Affairs Committee for draft legislation intended to support the launch of a digital euro.
The committee adopted its position on the single currency package, comprising three files. The file covering the establishment of the digital euro was approved by 43 votes to 14, with one abstention.
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The project aims to create an electronic form of money for euro area consumers and reduce reliance on international card networks. Under the proposed approach, online payments would be processed through an account-based system. Offline payments would use local storage devices.
The digital euro would be distributed by banks or fintech firms and would be available for online and in-person payments to all residents across the euro area.
Work on the initiative has been underway for six years. The committee vote advances draft rules that have been debated for several years among EU institutions, the ECB and the banking sector.
Banks have raised concerns about potential deposit outflows and the impact on fee income, and have sought limits on how the instrument would operate, according to a Reuters report.
The draft text includes measures aimed at addressing concerns about deposit migration. Under the proposal, the European Commission would decide how many digital euros an individual could hold, based on an ECB recommendation. The Commission would review the holding limit at least every two years.
The proposal also states that businesses would not be permitted to hold digital euros for longer than 24 hours. The digital euro would not pay interest and would be free to users.
“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 by giving Union citizens the freedom to opt to pay with central bank money in their daily transactions,” the news agency quoted the draft regulation as saying.
If there is no objection at Parliament’s plenary session, lawmakers are expected to begin negotiations next month with the European Council, representing EU member states, and the European Commission.
The institutions are aiming for final approval by the end of the year.
The ECB plans to run a 12-month pilot in the second half of next year, ahead of a potential full launch in 2029.
Outside the euro area, China has piloted a digital yuan at scale, while India and Brazil have run trials.
