The European Central Bank (ECB) and European Union member states are close to finalizing a political agreement that could unlock the stalled digital euro project, following a new proposal that transfers more authority to national governments over key aspects of the initiative. According to officials familiar with the draft framework, the ECB is offering to give EU capitals the power to determine the maximum amount of digital euros consumers can hold in their wallets.
The measure is designed to address concerns from several member states and banking industry representatives, who have warned that a central bank digital currency (CBDC) without clear limits could disrupt deposit bases and affect financial stability. Finance ministers are set to examine the proposal during an informal meeting in Copenhagen this week. The proposal does not require a unanimous decision but would need support through a reinforced qualified majority under EU voting procedures.
This method demands approval from at least 72 percent of euro area member states representing at least 65 percent of the region’s population. The proposal outlines a two-stage consultation process. Two years prior to the digital euro’s potential issuance, the ECB would begin formal consultations with member states. One year before launch, the central bank would propose a holding limit for digital euro balances. This limit, as well as any future adjustments, would require backing from the reinforced qualified majority, effectively increasing the role of national governments in shaping and revising key policy aspects of the digital euro.
The digital euro project, first launched in 2021 as part of the ECB’s investigation phase, has progressed slowly amid divisions over its design and implications for the banking sector. While the ECB has emphasized that the digital euro would complement rather than replace cash, several national governments have been cautious about adopting a digital currency that could draw deposits away from commercial banks, especially during periods of financial stress.
National governments to play bigger role in digital euro
The ECB has maintained that the digital euro is essential to strengthen Europe’s monetary autonomy and ensure the euro’s role in a rapidly evolving global payment environment. The Frankfurt-based institution has repeatedly highlighted the need to provide a public, secure and sovereign digital means of payment, as private sector alternatives including foreign digital payment systems and stablecoins gain traction in Europe.
In recent months, momentum behind the project has increased, with the European Commission backing legislative proposals to support the digital euro’s framework. However, disagreement over the ECB’s authority in setting usage caps has remained a major hurdle. The latest compromise aims to resolve that impasse by anchoring the holding limit decision-making process within EU institutional governance rather than leaving it solely to the ECB’s discretion.
Proposal aligns with EU legal and governance norms
If endorsed by finance ministers in Copenhagen, the plan could pave the way for formal adoption by the Council of the European Union, marking a key step in the legislative process. A final decision on whether to proceed with the issuance of the digital euro would be made at a later stage, following technical, legal and political assessments. The ECB’s Governing Council is expected to continue preparatory work while awaiting the outcome of member state discussions.
The central bank has not yet committed to a specific launch date, and the digital euro remains in the design and testing phase. Full implementation would depend on legislative approval and final decisions by EU institutions. The digital euro would be issued by the ECB and distributed through intermediaries such as commercial banks and payment service providers, offering consumers an electronic means of payment backed by the central bank. It would be accessible to euro area residents and designed to function both online and offline. – By EuroWire News Desk.