Europe’s digital euro heads to last stage of negotiations - what Council and Parliament agree on, and where they still clash

The digital euro, Europe's central bank digital currency (CBDC) project, has been more than three years in the making since the European Commission tabled its Single Currency Package in June 2023. The package presented by the Commission comprises three proposed regulations: one establishing the digital euro, one covering digital euro services from payment service providers (PSP) based outside the euro area, and one on the legal tender status of euro banknotes and coins (see our previous blogpost here).

From the outset, the discussions have been controversial. The Commission and the European Central Bank (ECB) have seen the digital euro as a strategic necessity: public digital money to offset declining cash use and reduce reliance on non-European card schemes and technology companies. Critics, including some from the European Parliament and the business sector, have disagreed, pointing to risks of deposit flight from banks, concerns over privacy and surveillance, and scepticism about whether public intervention is needed in a market that private providers already serve.

While tensions have shaped both institutions' positions throughout the negotiations, the co-legislators (the Council and the European Parliament) have now finalised their negotiating mandates and are heading into trilogue negotiations, with the aim of having the digital euro operational by 2029. The Council adopted its mandate under the Danish Presidency on 19 December 2025, and the European Parliament adopted its position on 9 July 2026.

The two positions concur on many key points. Notably, both mandates provide for the availability of an online and an offline version of the digital euro. The online version is not conditional on the absence of a pan-European private payment solution – a condition that had been put forward during the parliamentary process but ultimately did not make it into either institution's final negotiating position.

In the following, we set out a high-level overview of selected open questions on the negotiators’ tables.

Outstanding political questions 

a) Acceptance 

Mandatory acceptance sits at the heart of the digital euro's "legal tender" logic, but the two mandates still need to converge on how far that obligation should stretch and how it would work in practice. Both sides agree that there should be exceptions to mandatory acceptance depending on the type and size of the entity, but the Parliament goes further in carving out small and micro-enterprises specifically. The Council mandate also adds important details, notably a requirement that payers be able to choose between online and offline digital euro payments wherever acceptance is mandatory. 

Both texts agree that a payer must be free to choose between euro cash and the digital euro, as both are legal tender, but the practical rollout of that choice, and how it interacts with the availability of online and offline functionality at first issuance, still needs to be clarified.

b) Holding limits

Both texts agree that individual holdings of the digital euro need to be capped to prevent the currency from being used as a store of value and to protect financial stability, but they disagree on who gets to set that cap. The Parliament proposes that the Commission set the overall ceiling by a delegated act, informed by an ECB recommendation, which Parliament and Council could only object to rather than amend. The Council, instead, prefers the ceiling to be set through a Council implementing decision, adopted by a reinforced qualified majority and based on an ECB recommendation agreed with the Commission, which would keep Member States firmly in the driving seat. 

The two sides also differ on how legal persons are treated. The Parliament would write a near-total prohibition on legal persons holding digital euro into the regulation. In contrast, the Council suggests leaving the details to the ECB, guided by recitals which clarify that the limit should not prevent legal persons from discharging their mandatory acceptance obligations, while also hinting at the possibility of zero holding limits.

c) Compensation model

Merchant and inter-PSP fees are among the thorniest political issues on the table. The compensation model decides how PSPs get paid for handling digital euro transactions and what merchants are charged for accepting them. Under the Commission's original proposal, fees would have been capped at the lower of (i) the PSP’s costs plus a reasonable profit margin and (ii) the fees for comparable digital means of payment. The Parliament and the Council would introduce euro-area uniform caps based on, among others, comparable private means of payment (the Parliament refers to digital means of payment and the Council to card schemes), first under a transitional model and later shifting to a cost-based system. Parliament and Council agree in principle on this basic structure but disagree on how it would play out in practice. The Parliament proposes allowing the transitional model to run indefinitely if the Commission concludes in a report that this model provides lower costs for merchants and greater efficiency and competition in the payment markets, so it could end up becoming permanent. The Council suggests a firm cut-off: the transitional model must end after ten years at the latest. 

The two sides also disagree on how to protect merchants from higher fees imposed by PSPs during the transition. The Parliament advocates for such fees to be capped for each merchant individually (meaning the provision of a digital euro payment service to a merchant shall not exceed the merchant service charge levied by the PSP on that merchant for any comparable digital means of payment). The Council prefers caps set at a national level (applying not only to such merchant fees but also to inter-PSP fees), kicking in only where they are well below the euro-area uniform caps. Some smaller details, like offline fees between providers and rules for micro-enterprises and small payments, also need to be resolved.

d) Privacy

Sitting just below the top-tier political issues, but far from uncontroversial, are questions of privacy and data protection. Both sides agree the digital euro should be highly privacy-preserving, especially offline, where it is designed to work like cash. The disagreement is over the details. The co-legislators need to agree on exactly which types of personal data can be processed by PSPs, the ECB, and national central banks. The Council has added specific rules to this end, detailing how the system checks that an offline payment is genuine. The Parliament's text takes a different approach regarding the technical safeguards while also emphasising alignment with EU privacy rules, like the GDPR. 

e) Further key points

Beyond privacy, the Parliament has also pushed further on the ECB's independence and accountability. It has proposed rules to avoid conflicts of interest between the ECB's monetary, supervisory, and oversight roles; new reporting duties after pilot testing; and a new advisory platform for the digital euro scheme rulebook to support the implementation of the digital euro on an ongoing basis. This platform would include payment market participants, merchants, end-user representatives, and consumer organisations, and would aim to provide transparency in its composition and functioning. 

What's next

Political negotiations are just starting. Assuming that it went ahead as planned, the first political trilogue took place on 13 July and focused on agreeing the political/technical split and opening discussions on the tier-one issues – chiefly holding limits and the compensation model – with a technical trilogue pencilled in for the following day. The Irish Presidency of the Council has made it clear it intends to keep the file moving at pace, in line with the "One Europe, One Market" roadmap agreed by the Council, Parliament and Commission, which calls for the legislation to be finalised by the end of the year. Further trilogues will follow after the summer break, with the institutions aiming to reach a political agreement before the end of the year. 

In parallel with the legislative track, the ECB is pressing ahead on the technical side, having this week unveiled the 36 banks and other PSPs that will take part in its digital euro pilot starting in the second half of next year. While the pilot runs independently of the Brussels negotiations, it underscores the momentum building on both fronts, with the ECB aiming to be ready to begin issuing the digital euro as early as 2029 if the legislative timetable holds.

Our regulatory and public affairs team, as well as our financial services regulatory team, continue to monitor these developments and are available to discuss.