The European Parliament's Economic and Monetary Affairs Committee has approved a legal framework for launching a state-backed digital currency by 2029, marking a significant milestone after three years of intense negotiations between central and commercial banks. According to reports from The Economic Times, the committee directly mandated the immediate start of final 'trilogue' negotiations between EU member states and the Parliament to hammer out the final law. The vote ended years of confrontations between central bankers and commercial lenders concerned over losing deposit revenue. The committee approved the proposal in a 43 to 14 vote, with lawmakers backing the draft legislation that sets out comprehensive rules for how a digital euro would operate, who could distribute it, and what safeguards would apply to users and financial institutions. The proposal was backed by the EP's Economic and Monetary Affairs Committee on Tuesday, June 23, bringing the European Union closer to moving forward with a central bank digital currency.
The main goal behind the central bank digital currency (CBDC) deployment is to maintain the bloc's monetary system autonomy rather than just modernizing payments. As reported by The Economic Times, ECB President Christine Lagarde has long argued in favor of a CBDC to counter U.S. dollar-pegged stablecoin dominance, particularly Tether's USDT and Circle's USDC. The EU has highlighted that nearly two-thirds of all card transactions in the eurozone are processed by non-European companies, mainly Visa and Mastercard. According to the latest estimates, the digital euro will be launched by 2029. Fernando Navarrete Rojas, a leading ECON committee member, stated that 'strengthening the resilience of payments in Europe has become a geopolitical necessity' in a world marked by geopolitical tensions. The committee's proposal preserves consumers' ability to choose their preferred payment method and describes the digital euro as a complement to cash rather than a replacement. The move comes as policymakers try to enhance the bloc's payment independence and lessen its dependence on financial infrastructure abroad.
The approved framework includes comprehensive privacy protections built around zero-knowledge proofs that allow transaction verification without revealing personal information, with the ECB having no access to users' identification data. According to The Economic Times, the offline functionality operates similarly to cash because users would permanently lose funds stored on a lost device. This offline version allows users to swap digital euros directly from phone to phone without an internet connection, guaranteeing cash-like privacy that prevents the ECB from monitoring citizen purchases. Within the framework, digital euros would be stored in dedicated wallets by consumers and limits on holding will still be negotiated. The system also has the flexibility to accept payments both online and offline, providing robust privacy features that complement the digital euro's core infrastructure.
The legislation outlines a comprehensive distribution framework that includes banks, payment providers, electronic money institutions, and regulated crypto firms, with post offices also participating in distributing the digital euro throughout the eurozone. As reported by The Economic Times, the proposal calls for a rollout period of at least two years after final legislative approval, with the ECB required to complete technical standards, conduct testing programs, and coordinate implementation with payment providers before any launch. The draft prohibits interest payments on digital euro balances and restricts business holdings to temporary collection periods generally for no longer than 24 hours. Most merchants would need to accept the currency, though certain small businesses and self-employed operators would qualify for exemptions if they don't already accept digital payments. The ECB would provide the core infrastructure while banks and payment providers would provide payment services to users.
The committee's approval follows the ECB's preparatory work that began in 2020, with technical standards expected in 2026 and pilot testing planned from 2027. ECB Executive Board member Piero Cipollone told European lawmakers that the central bank wants to be technically prepared for a possible launch by 2029 if lawmakers approve the legal framework. The committee's approval comes as European policymakers continue debating the role of private digital currencies, with ECB Executive Board member Isabel Schnabel warning that stablecoins approaching a $300 billion market capitalization could create financial stability risks. Meanwhile, private-sector projects continue under the European Union's Markets in Crypto-Assets framework, with banking consortium Qivalis expanding to 37 member institutions in May and preparing a regulated euro-denominated stablecoin targeted for launch in the second half of 2026. The move comes on the heels of Bank of England easing stablecoin rules, which shows growing adoption of crypto tech in EU.
While Europe advances work on a central bank-issued digital currency, policymakers in the U.S. are pursuing a different approach. The U.S. Senate recently approved the 21st Century ROAD to Housing Act in an 85-5 vote, which includes a provision that would prevent the Federal Reserve from creating a CBDC or similar asset before the end of 2030. This Senate position aligns with President Donald Trump's support for privately issued stablecoins rather than a Federal Reserve-backed digital currency. Meanwhile, lawmakers are looking to advance the CLARITY Act for clearer crypto rules in the country. The EU's decision is contrary to what is happening in the United States, where President Donald Trump has backed private stablecoins but dropped plans for a CBDC from the Federal Reserve. The contrast highlights the divergent approaches to digital currency development between the two major economies.
