ECB simulations show depositors could pull up to €699 billion from euro zone banks if the digital euro holding limit is set at 3,000 euros per person. That's 8.2% of all retail sight deposits, and the hit would land hardest on small lenders and retail banks.
Why the Digital Euro Passed After Three Years of Banker Pushback
The economic committee of the European Parliament approved draft rules on Tuesday, ending a three-year standoff between the ECB and commercial banks worried about deposit outflows and lost fee revenue. The digital euro gives every euro zone resident a central-bank-guaranteed electronic wallet, marketed through banks or fintechs, usable for online and in-person payments. Six years in the making, the project gained urgency after Trump's return to the White House and fears that the US could weaponize Visa and Mastercard dominance against the EU.
Holding Caps, No Interest, and a 2029 Launch Date
Lawmakers proposed the European Commission set a maximum number of digital euros each user can hold, based on an ECB recommendation, and review that ceiling every two years. Businesses cannot hold digital euros longer than 24 hours. The wallet pays no interest and costs nothing to users - a compromise that keeps commercial banks as the distribution channel. "The proposal reflects political compromises," said Laura Casonato of Positive Money Europe. "It keeps commercial banks at the centre of distribution, with only a limited role for public channels."
Cost Estimates and the Race Against Private Initiatives
The ECB put setup costs at €4-6 billion spread over four years. Far-right MEPs warned the digital euro may be "obsolete" by launch time, given competing private services like Wero, a consortium of major European banks offering instant payments. The Greens pushed for cheap merchant fees and an exemption for small businesses and the self-employed. The Parliament negotiator, Fernando Navarrete Rojas, only recently dropped his opposition to making the digital euro available online.
Next Steps and the Transatlantic Dimension
Barring a plenary objection, lawmakers start negotiating with the European Council and Commission next month, aiming for final approval by end of 2026. The ECB plans a 12-month pilot starting in the second half of 2027, before a full launch in 2029. Outside the euro area, China runs a pilot digital yuan at scale; India and Brazil have conducted trials. Trump has forbidden the Federal Reserve from issuing a digital currency. The digital euro's real test: whether it ships before private alternatives render it obsolete, or before transatlantic tensions make it indispensable.
Source: Digital euro clears key hurdle as EU seeks to break free from U.S. credit cards
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