European lawmakers have backed plans for a digital euro that could be used online and offline, distributed by banks and other regulated providers, and accepted by most businesses across the currency union.
The European Parliament’s Economic and Monetary Affairs Committee adopted its position on 23 June by 43 votes to 14, with one abstention. The vote prepares the ground for negotiations with EU governments over the final legislation.
A digital euro would give people and businesses access to an electronic form of central bank money. Unlike funds held in a commercial bank account, tokenised deposits or stablecoins, it would be a direct liability of the European Central Bank (ECB) and carry no issuer credit risk.
Moody’s Ratings, a global credit rating agency, described the committee vote as an important stage in the project, although it expects the immediate financial effects to remain limited.
“The EU’s move toward a retail digital euro marks a meaningful milestone for central bank money in the digital age,” said Olivier Chemla, vice-president and senior credit officer at Moody’s.
Uncertain consumer demand, competition from existing payment services and the cost of adapting bank systems are likely to carry more weight than the risks of customers moving deposits into digital euros, according to the credit rating agency.
How the digital euro would work
Online payments would operate through an account-based system, with transactions processed through the digital euro infrastructure. Offline payments would work differently. Funds would be stored locally on a phone, card or another device, allowing users to pay without an internet or mobile connection.
The European Parliament compares this function with physical cash. Losing the device could mean losing the offline digital euros stored on it, with no right to a refund.
Banks, electronic money institutions, post offices and regulated cryptoasset providers would be able to distribute the currency. A separate part of the legislative package would allow payment providers based in EU countries outside the euro area to offer digital euro services under the same rules.
Visitors and tourists could also gain access, along with some people living outside the euro area.
The digital euro would sit alongside cash, cards, bank transfers and commercial payment services rather than replacing them. Rapporteur Fernando Navarrete Rojas said it would “complement cash, never replace it”.
Privacy, fees and acceptance
Parliament wants privacy protections included in the design from the outset.
Technologies including zero-knowledge proofs could allow transactions to be verified without revealing the underlying personal information. Data would be processed only where required to provide the service, and the ECB would have no access to information that directly identifies individual users.
Basic digital euro services would be free. These would include opening an account, holding and managing funds, and receiving at least one instrument through which payments could be made.
Providers could charge for additional services, although inactivity fees and charges created through compulsory product bundles would be prohibited. Fees paid by merchants and between providers would be capped, while offline payments would carry no charge.
Most companies that accept other electronic payments would also have to accept the digital euro.
Exceptions would cover self-employed people and small or micro businesses that do not already take digital payments. Temporary refusals could also be permitted during power cuts or other situations in which the required systems were unavailable.
Finance Watch, a European financial reform advocacy group, welcomed the provisions on free basic services, privacy and broad acceptance. It said the fee rules could also give merchants a lower-cost alternative to international card schemes.
Peter Norwood, senior research and advocacy officer at Finance Watch, said: “Parliament has found a majority for a digital euro that is more than another payment app. The text keeps the original ambition of the project alive: ensuring inclusive access to public money in an increasingly digital payments landscape, all while protecting European sovereignty.”
Holding limits curb bank risks
Individuals would face a limit on the number of digital euros they could hold at one time, reducing the possibility of large amounts moving out of commercial bank deposits.
Parliament wants the European Commission to set an EU-wide ceiling based on recommendations from the ECB. The limit would be reviewed at least once every two years, with MEPs seeking a full decision-making role in the process.
No final amount has been agreed. ECB modelling examined by Moody’s includes an individual limit of up to €3,000.
Digital euro accounts could be linked to ordinary bank accounts, allowing people to make payments above the holding limit without having to store the full amount in their digital euro wallet beforehand.
Businesses would generally be unable to retain digital euro balances. They could accumulate incoming payments for up to 24 hours before the funds were transferred elsewhere.
Digital euro holdings would earn no interest, preserving the distinction between a means of payment and a savings product.
Moody’s believes these restrictions would contain the risk of bank disintermediation. In an extreme scenario involving customers transferring funds up to a €3,000 limit, liquidity coverage ratios across the euro-area banking system would remain above the regulatory minimum of 100%.
A small number of institutions could move closer to their individual thresholds, although the wider funding and liquidity effect would remain manageable.
The impact on bank profitability would also be modest in the ECB’s modelling, with return on equity falling by less than 40 basis points across euro-area countries.
Sovereignty gains remain modest
Supporters see the digital euro as a way to reduce Europe’s dependence on international card schemes and technology companies.
Nearly two-thirds of card-based transactions in the euro area are processed by non-European companies, according to ECB figures cited by Moody’s. Thirteen euro-area countries rely entirely on international card systems or mobile providers for payments made in stores.
A common public payment option could provide an alternative during geopolitical or operational disruption and make payments more consistent across the 21 countries using the euro.
Greater use of traceable digital payments could also make value added tax avoidance more difficult, offering a small benefit to public finances.
Moody’s nevertheless expects the economic and credit gains for euro-area governments to be limited. Europe already has a developed payments market and a relatively low proportion of people without access to banking services.
The digital euro may therefore improve payment sovereignty and resilience without producing a large increase in economic activity or financial inclusion.
Costs and adoption create uncertainty
Bank implementation costs present a more immediate concern than deposit outflows. The ECB and national central banks would fund the central infrastructure. Moody’s cites an estimated €1.3 billion in development costs and approximately €320 million in annual operating expenses.
Banks and other distributors would need to adapt their own systems, customer interfaces, fraud controls and payment processes.
Industry-commissioned research has placed the total cost to banks at about €18 billion. The ECB’s lower assessment puts the figure at between €4 billion and €5.8 billion over four years, equivalent to less than 0.7% of the euro-area banking system’s net income.
Further costs could arise if banks had to replace deposits transferred into digital euros with more expensive sources of funding. Research from BNP Paribas cited by Moody’s estimates that these additional costs could increase borrowing rates for households and companies by two to three basis points.
Whether the investment produces widespread use remains uncertain.
European consumers already have access to contactless cards, mobile wallets, instant transfers and services such as Wero, the bank-backed payment system offering instant payments across participating European markets.
Retail central bank digital currencies introduced in the Bahamas and Nigeria have also attracted limited use compared with established payment methods. The economic and financial conditions in those countries differ considerably from the euro area, although their experience shows that public issuance alone does not guarantee adoption.
Stablecoins remain a separate market
Moody’s does not expect the retail digital euro to challenge the dominance of US dollar-backed stablecoins.
The two forms of digital money serve different markets. A digital euro would be designed for everyday purchases and transfers, with legal tender status in the euro area. Stablecoins are primarily used in cryptocurrency trading, digital asset settlement and other blockchain-based financial activity.
Euro-denominated stablecoins represented less than 1% of the global stablecoin market in January 2026. Their combined market value was about €450 million, according to ECB figures included in the Moody’s report.
The digital euro would operate through a centralised settlement platform rather than distributed ledger technology.
Separate ECB projects, including Appia and Pontes, are examining how central bank money could be used to settle wholesale financial transactions conducted through distributed ledgers.
Cash stays in the package
The committee vote formed part of a three-part single currency package that also covers the legal status and availability of physical cash.
Euro-area governments would have to monitor access to banknotes and coins, paying particular attention to older people, those on low incomes and people without bank accounts.
Businesses would be prevented from imposing blanket cash bans through “no cash” signs or standard contract terms. Countries would also need plans for maintaining payment services during digital outages.
Finance Watch said the cash and digital euro proposals should be viewed together, with one protecting access to banknotes and coins and the other extending a public payment option to online and offline digital transactions.
The approach reflects Parliament’s position that consumers should retain a choice between physical and digital central bank money.
Next steps
Negotiating mandates for the three legislative files are expected to be announced at the beginning of the European Parliament’s July plenary session. Parliament and the Council will then negotiate the final legislation.
Before any launch, the ECB would need to complete a rulebook, build the infrastructure and conduct trials using real payment journeys. Liability arrangements would also have to cover offline risks, including the possibility of the same locally stored funds being spent twice.
Parliament proposes a preparation period of at least 24 months after formal authorisation, giving banks, payment providers, merchants and consumers time to prepare. Governments and payment providers would also run public information campaigns.
Moody’s said the ECB aims to be ready for a possible first issuance in 2029. The final timetable will depend on the legislation, the pilot programme and decisions covering holding limits, fees and the responsibilities of participating providers.
