<\/p>\n
The European Central Bank (ECB) secured key support from parliament for the launch of the digital euro, an electronic payment tool aimed at reducing the eurozone\u2019s reliance on US credit cards amid deteriorating transatlantic relations.<\/p>\n
As quoted by Reuters, the digital euro, which is essentially an electronic wallet guaranteed by the central bank but distributed through banks or fintech companies, would allow all eurozone residents to make online and in-person payments.<\/p>\n
After six years of development, the ECB\u2019s digital currency plan has become increasingly urgent since Donald Trump returned to the White House, imposed tariffs on trading partners including the European Union, and raised concerns that the US could use its dominance over payment networks such as Visa and Mastercard as a tool of geopolitical pressure.<\/p>\n
The approval of the draft regulation by the European Parliament\u2019s economic committee came after three years of debate between the ECB and the banking sector, which was concerned about deposit outflows and lost revenue, while seeking to limit the scope of the project.<\/p>\n
\u201cThe introduction of the digital euro will reduce excessive reliance on non-European providers by becoming a pan-European payment instrument and bringing the single currency into the digital era by giving EU citizens the freedom to use central bank money in everyday transactions,\u201d the draft regulation stated.<\/p>\n
Siegbert Frank Droese from the right-wing Europe of Sovereign Nations political group in the European Parliament said his group opposed the proposal, meaning a further vote in the parliament\u2019s plenary session may be required.<\/p>\n
If there are no objections during the plenary session, lawmakers will begin negotiations with the Council of the European Union and the European Commission next month, with the target of reaching final approval by the end of this year.<\/p>\n
The ECB plans to conduct a 12-month digital euro pilot programme starting in the second half of next year before a full launch in 2029, and said it welcomed the European Parliament\u2019s final position.<\/p>\n
Outside the eurozone, China has conducted large-scale trials of the digital yuan, while India and Brazil have also carried out trials.<\/p>\n
The UK remains focused on research due to concerns over privacy, financial stability and the impact on the banking sector, while US President Donald Trump has banned the Federal Reserve from issuing a digital currency.<\/p>\n
Like the European Council previously, the European Parliament has established several safeguards for banks concerned about large-scale withdrawals.<\/p>\n
Lawmakers proposed that the European Commission determine a limit on digital euro holdings per user based on ECB recommendations, and review the limit every two years.<\/p>\n
Companies will not be allowed to hold digital euros for more than 24 hours.<\/p>\n
The digital euro will also not provide interest or charge fees for users.<\/p>\n
\u201cThis proposal reflects a political compromise,\u201d said Laura Casonato of Positive Money Europe. She said commercial banks would remain at the centre of distribution, while the role of public channels remained limited.<\/p>\n
The compromise was considered important to attract support from parties that had previously opposed the proposal, including parliamentary negotiator Fernando Navarrete Rojas.<\/p>\n
ECB simulations show that depositors could withdraw up to 699 billion euros from eurozone banks if the holding limit was set at 3,000 euros per person, equivalent to 8.2% of retail deposits.<\/p>\n
Auke Zijlstra from the Patriots for Europe group said the next key discussion would be compensation for companies for implementation costs, which the ECB estimates would reach 4 billion\u20136 billion euros over four years.<\/p>\n
However, he said the project could become \u201cobsolete\u201d before launch due to private-sector innovations such as the Wero instant payment system backed by major European banks.<\/p>\n
Meanwhile, Damian Boeselager from the Green Party stressed that the digital euro should be inexpensive for merchants, although many would be required to accept it.<\/p>\n
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