The Council of the EU has agreed its negotiating position on enabling a digital euro to be introduced.

The digital euro would complement cash and would be available to consumers and businesses to make payments at any time and anywhere in the euro area.  It would be backed by the European Central Bank (ECB).

Under the Council's proposal, the digital euro would:

• be available online or offline and so not require an internet connection;
• allow for payments and money transfers with a high degree of privacy; and
• exist alongside national and international private means of payment, such as cards or applications run by privately-owned providers.

Once the proposal to establish the legal framework is adopted by the European Parliament and Council, it will ultimately be for the ECB to decide whether to issue the digital euro. The ECB has recently indicated that the digital euro could be up and running by 2029.

To avoid the digital euro being used as a store of value and any impact on financial stability, the Council's proposal text provides for limits on the total amount of digital euros that can be held on online digital accounts and in digital wallets at any one time. The limits will be set by the ECB, but must respect an overall ceiling agreed by the Council which will be reviewed at least every two years.  

Payment service providers may not charge consumers for certain mandatory services, such as opening and closing accounts, carrying out digital euro payment transactions from their account or wallet, or funding and defunding their digital euro accounts or wallets with money from their other deposit accounts with the same payment service provider. However, certain added-value services may be subject to fees.

The proposal also aims to make sure that providers of digital euro interfaces and services receive the necessary access to mobile device producers' hardware and software to ensure that fair access can be granted.

It also sets out how payment service providers will be compensated. During a transitional period (which will be a minimum of five years), interchange and merchant service charges will be capped at a level based on fees for comparable means of payments. After the transitional period, fee caps will be set based on the actual costs associated with the digital euro.

The Council will now enter into negotiations with the European Parliament on the digital euro.

Recently, the Bank of England issued an update on its progress towards possibly introducing a digital pound. The Bank will update on next steps in 2026. 

As well as the digital euro, the Council also indicated its wish to effectively ban non-acceptance of cash by retailers or service providers, with a few exceptions for payments for goods or services purchased at a distance, including online, and unmanned points of sale. However, it would not prevent businesses from indicating a preference for card or digital forms of payment.