The big picture: The European Parliament's Committee on Economic and Monetary Affairs has approved the establishment of the digital euro by a vote of 43 to 14. The digital version of the European currency is designed to facilitate fast, secure, and private transactions across the eurozone while reducing reliance on US payment network giants Visa and Mastercard.
The European Parliament said the digital euro can be used to make both online and offline payments to merchants across Europe. Online payments would be processed through an account-based system, while offline payments would function more like cash, with transactions conducted directly via local storage devices such as smartphones.
The EU emphasized that the digital euro has been designed with a strong focus on privacy, using encryption and privacy-preserving technologies such as "zero-knowledge proofs." The authentication protocol is expected to allow transactions to be verified without exposing personal data to either the merchant, the European Central Bank, or any government agency.
All businesses operating within the EU, regardless of size, will be required to accept digital euro payments, with exceptions for "micro enterprises" that do not already accept other forms of digital payments.
While the digital euro is primarily designed for EU citizens, tourists and visitors from outside the eurozone will also be able to use it while traveling in Europe.
The digital euro will be free to use for consumers, but merchants will have to pay fees to the European Central Bank on each transaction. However, these fees are expected to be lower than the commissions charged by Visa and Mastercard. Financial institutions are also expected to be compensated for their role in the system, although the details have yet to be finalized.
The European Parliament is expected to formalize its approval of the digital euro during a plenary vote in Strasbourg next month. Following the vote, the ECB will begin negotiations with the EU's 27 member states, with lawmakers aiming to reach a general consensus by the end of the year.
Once the formalities are completed, the ECB plans to run a 12-month pilot of the digital euro starting in the second half of 2027, before an official launch in 2029. After launch, all payment service providers – including banks, post offices, digital wallet operators, and regulated crypto exchanges – will be eligible to distribute it to residents and visitors across the eurozone.