Home Knowledge A Digital Euro for the Digital Age

A Digital Euro for the Digital Age

On 28 June 2023, the European Commission published its proposal to introduce a Digital Euro (press release available here).

This is the first legislative step of an exploratory process to determine whether a Digital Euro will be issued by the European Central Bank (ECB).

The draft Digital Euro regulation proposes, among other things, to grant legal tender status to the future digital form of the single currency.

It aims to make the Digital Euro available to everyone offering a state-of-the-art and cost-efficient payment means, with or without a bank account.


The concept of a Digital Euro has been discussed for some years in tandem with similar discussions in the United Kingdom regarding a Digital Pound and the United States regarding a Digital Dollar. Each of these potential digital currencies is intended to complement banknotes and coins and to be backed by a central bank (commonly referred to as Central Bank Digital Currencies (CBDCs)). As society is increasingly digitised, it is hoped that CBDCs will help future-proof the continued use of existing fiat currencies as well as perhaps prevent the mass market use of privately issued currencies such as stablecoins (please see here for our briefing on MiCA).

Role of the ECB

The ECB will ultimately make the decision on whether a Digital Euro will be issued. It is proposed that the ECB will be the issuer of the Digital Euro and that it will be made available to the general public. It is also proposed that the ECB will guarantee the Digital Euro to ensure that it keeps a stable value so that it can be exchanged at face value for Euro cash.

Investigation phase

The ECB is anticipated to complete its investigation phase on the Digital Euro’s design and distribution around October 2023. It will then decide whether to initiate a preparation phase to look at developing and testing the new digital currency.


While the proposal remains at an early stage, the draft text contains several interesting points, such as:

  • It is proposed that the Digital Euro will complement Euro banknotes and coins, not replace them and that it will be convertible to Euro banknotes and coins at par value.
  • It is proposed that the Digital Euro could be used in both online and offline payments. Online and offline, Digital Euro payment transactions must be settled instantaneously.
  • A prohibition of the unilateral exclusion of payments through Digital Euro is proposed, with a limited exemption for microenterprises and non-profit legal entities who may refuse to accept payment through the Digital Euro.
  • It is proposed that there would be holding limits for each Digital Euro user (notably, an allocation per user, not per Digital Euro account). According to the ECB, this measure is intended to limit an outflow of deposits from banks and protect financial stability.

Open Issues

If the Digital Euro initiative reaches fruition, some important considerations remain around the following points:

  • Rationale
    Although this proposal marks progress on the Digital Euro initiative, some questions remain on the rationale for the introduction of a Digital Euro. One of the issues which had spurred the idea was Facebook’s launch of a virtual currency and fear that Libra (as it was known at that time) could undermine the ECB’s control of the money supply if widely used. This turned out not to be the case.
  • Holding limits
    No decision has been taken on the maximum amount that can be held on a Digital Euro account. This will ultimately be a decision for the ECB, which indicated in 2022 that holdings of around 3,000 to 4,000 digital euro per person would be considered appropriate in the interest of financial stability. However, an Assessment of the ECB’s first three progress reports dated May 2023, which was requested by the European Parliament’s Committee on Economic and Monetary Affairs (ECON) questions the assumption that caps on Digital Euro holdings would be necessary in the interest of financial stability and favours an approach that allows everyone unlimited access to Digital Euro.
  • Costs, fees and charges
    It is proposed that fees and charges will not be levied on users for using the Digital Euro. There are concerns within the banking industry about shouldering the project’s potential costs with few benefits, particularly if Digital Euro payments are free, as suggested. This element will require an ECB decision also.
  • Technology
    The proposal takes a technology-neutral approach and does not confirm whether the Digital Euro would rely on distributed ledger technology (DLT). The ECB will also have a significant role in the functionality of the Digital Euro app.
  • Privacy
    Ensuring a high level of privacy in digital payments also forms part of the objective of the Digital Euro proposal. For instance, the draft legislation provides that the initiative supports the objective of ensuring a high level of privacy in payments in line with EU data protection law such as GDPR (Regulation (EU) 2016/679) and states that the settlement of Digital Euro transactions will be designed in such a way that neither the ECB nor national central banks can attribute data to an identified or identifiable Digital Euro user. However, there is some public fear that a State could use a digital currency to track and control spending or replace cash altogether.
  • Other jurisdictions
    Proposals to introduce a digital currency by the European Union are among the most advanced by a large economy. It will be interesting to see how similar plans for CBDCs play out in China, the United States and the United Kingdom in coming period.


While discussions begin to ramp up on why and how a Digital Euro should be introduced, including technological aspects, it is clear that the proposed Digital Euro will not be created in the short term. Although the ECB is expected to make announcements in October 2023 about commencing an implementation phase, if the proposal is pursued, after the adoption of the proposal by the European Parliament and Council, the ECB would need to take the final decision on the issuance of a digital euro. This is likely still a number of years away (at least not before 2028).

If you wish to discuss any of the above, please contact Shane Kelleher, John O’Connor, Louise McNabola or your usual William Fry contact.