Hybrid approach prioritises accessibility while preserving user privacy
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The Council of the EU has voiced its support for a proposal for a digital euro that would function both online and offline. This position differs from earlier proposals by the European Parliament, which focused solely on offline use.
According to the Council’s draft, the digital euro, which would be issued to the public by the European Central Bank (ECB), could be used anytime and anywhere, regardless of internet connectivity. While the European Parliament’s rapporteur had argued for an online‑only model in order to prioritise user privacy and system resilience, the Council acknowledges the value of online access for a broader range of digital payment options.
The proposed system would enable both instant online transactions processed via the central bank’s ledger or authorised intermediaries, and offline transactions that can be recorded locally and synchronised with the central ledger once connectivity is restored. This hybrid approach ensures ease of use even in areas with limited Internet access, while at the same time preserving a degree of confidentiality comparable to cash transactions.
Modernising payments
The ECB aims to introduce the digital euro as part of its efforts to modernise the payments system and ensure that central bank money remains relevant in an increasingly digital world. As the use of cash declines, a central bank‑issued digital currency would help safeguard monetary sovereignty and maintain public trust in the currency.
The project has, however, only progressed gradually and faces resistance from certain parts of the banking sector. The Council recognises the need for flexibility and resilience, and has included offline functionality for everyday use, while building in online access to support a broader range of digital payments.
To contain potential risks to financial stability, the Council proposes limiting individual holdings of digital euros. The ECB would set these ceilings, with an overall cap to be reviewed every two years. In addition, providers would be required to offer basic digital‑euro services free of charge, with fees only levied for value‑added features. During a transition period of at least five years, settlement and merchant fees would be capped at levels comparable to existing payment methods, after which adjustments based on actual costs would be possible.
The Council’s agreement paves the way for negotiations with the European Parliament to establish the legal framework for the digital euro. Once this framework has been approved, the ECB can issue the digital euro, which could become operational in 2029 after a trial phase in 2027.
Business AM