Digital euro clears key hurdle

Digital euro clears key hurdle as EU seeks to break free from U.S. credit cards

Francesco Canepa and Valentina Za

The European Central Bank secured key parliamentary backing on Tuesday for the launch of a digital euro, an electronic means of payments aimed at making the euro zone less reliant on U.S. credit cards at a ‌time of fraying transatlantic relationships.

The digital euro, essentially an electronic wallet guaranteed by the central bank but marketed by banks or fintech companies, will allow all euro zone ‌residents to make payments online and in person.

Six years in the making, the ECB's digital cash has become a more pressing issue since Donald Trump returned to the White House, slapping tariffs on even established trade partners such as ​the European Union and raising fears that the U.S. could one day weaponize its dominance over payment networks like Visa and Mastercard.

The approval of draft rules by the economic committee of the European Parliament comes after three years of wrangling between the ECB and banks, which have been concerned about deposit outflows and lost revenues and sought to limit the scope of the project.

"The introduction of the digital euro would... reduce overreliance on non-European providers by becoming a pan-European means of payment and would bring the single currency into the digital era by giving Union citizens the freedom to opt to pay ‌with central bank money in their daily transactions," the draft regulation ⁠says.

FINAL APPROVAL BY YEAR-END?

Siegbert Frank Droese of the far-right Europe of Sovereign Nations, a political group in the European Parliament, said his group had voted against the proposal, raising the likelihood that a further vote would be needed at the Parliament's plenary.

Barring an objection at the plenary, lawmakers should start negotiating ⁠with the European Council of EU governments and the European Commission next month, aiming for final approval by the end of the year.

The ECB, which plans to run a 12-month pilot of the digital euro starting in the second half of next year before a full launch in 2029, said it looked forward to Parliament adopting its final position.

Outside the euro area, China has been piloting a digital yuan at scale, ​while ​countries like India and Brazil have conducted trials. Britain has focused on research, amid concerns over privacy, financial ​stability and banking-sector impact, while U.S. President Trump has forbidden the Federal ‌Reserve from issuing a digital currency.

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