The European Council has agreed its negotiating position on proposals to strengthen the euro currency by introducing a digital euro and by making the legal tender status of euro cash clearer.
The initiatives, which aim to strengthen the EU’s autonomy, economic security, and resilience, relate to two regulations. One regards clarifying the legal framework for the potential issuance of a digital euro, and the other is about safeguarding the role of cash by ensuring its wide acceptance and availability.
Digital euro and cash coexisting in the EU
The digital euro would complement cash and be available to the public to make payments in the euro area anytime and anywhere, being a public facility backed by the ECB. The currency would help with the preservation of central bank money as the key to a well-functioning payment system.
The proposal states that the digital euro would also be available online and offline, allow for money transfers with a high privacy level, and exist alongside national and international private means of payment, like cards or applications powered by privately-owned providers.
When the proposal is adopted by the European Parliament and Council, it will remain for the ECB to decide whether to issue the digital euro and when to do so. If European co-legislators adopt the digital euro regulation in 2026, pilot testing and initial transactions could begin by mid-2027, with the Eurosystem fully prepared for a first issuance in 2029.
In the position agreed, the Council clarified crucial elements regarding the design of the digital currency. To avoid any impact on financial stability, and the digital euro to be utilised as a store of value, the Council offered limits on the total amount of digital euros that can be held on online digital accounts and in digital wallets at a time. The limits will be set by the ECB and must respect a general ceiling agreed by the Council, which will be reviewed once every two years.
Additionally, PSPs may not charge customers for certain mandatory services, such as opening and closing accounts, carrying out digital euro payment transactions from their account or wallet, or funding and defunding their digital euro accounts or wallets with money from their other deposit accounts. Yet, some added-value services may be subject to fees.
PSPs will be compensated, as interchange and merchant service charges will be capped at a level based on fees for comparable means of payments. Free caps will be based on the real costs associated with the digital euro after the transitional period.
When it comes to cash, the Council wishes to ban the non-acceptance of euro cash by retailers or service providers, with exceptions for solutions purchased at a distance, including online. However, businesses must still indicate a preference for card or digital forms of payment for transparency.
