The European Union has taken a key step towards the creation of the digital euro, breaking a political deadlock that was slowing down the project. At a meeting in Copenhagen, Member State finance ministers agreed with the European Central Bank (ECB) on a roadmap for the project, while securing decisive influence over key aspects of the project.
From the outset, the digital euro project was positioned as a strategic response to the dominance of US payment systems such as Visa and Mastercard. It is intended by the ECB to be a tool to strengthen Europe’s financial sovereignty and counterbalance the global expansion of stablecoins linked to the dollar.
However, the initiative was met with resistance from some lawmakers and the banking sector. Concerns were raised about potential ‘runs on banks’, where citizens would exchange their deposits en masse for the ECB’s digital currency. There were also doubts about user privacy and the high cost of implementing the new infrastructure.
Friday’s agreement is an attempt to resolve these issues. Finance ministers were guaranteed a key say on two fundamental issues: the final decision on the issuance of the digital euro and the setting of a limit on the ownership of this currency by a single citizen. The latter is intended to directly mitigate the risk of capital outflows from commercial banks.
With this compromise, the project is gaining new momentum. The European Council plans to finalise its position by the end of this year. The ECB hopes that the relevant legislation will be adopted by June next year.
Even under this optimistic scenario, the technical implementation and launch of the digital euro will take another two and a half to three years. This means that Europeans will not use the new form of payment until 2027-2028 at the earliest.
The launch of a common, EU-wide system is seen not only as a technological innovation, but above all as a political statement of Europe’s ability to build and maintain its own cross-border financial infrastructure.
