European Parliament backs digital euro to reduce US dominance in payments

The European Parliament's Economic and Monetary Affairs Committee gave the green light to the long-awaited digital euro on Tuesday, as the European Union seeks to diminish its dependence on US-dominated payment infrastructure. According to European Central Bank (ECB) data, US payment giants Visa and Mastercard handle 61% of card payments in the euro area and nearly all cross-border card transactions.

The digital euro would be a digital form of central bank money issued and backed by the ECB. It is designed to complement cash and existing banking services, not replace them. Consumers would be able to hold digital euros in a dedicated wallet, subject to a spending limit yet to be determined. The system would support both online and offline payments and offer a high degree of privacy, with the ECB unable to directly identify users from their transaction data.

The ECB would provide the underlying infrastructure, while commercial banks and payment service providers would offer digital euro services to customers. Both financial institutions and merchants are expected to be compensated for their participation, but how that compensation is structured remains a contentious issue ahead of negotiations with EU member states.

Italian MEP Pasquale Tridico, who negotiated the file on behalf of The Left group, called the vote "historic" and described the approval of the digital euro regulation as a major victory for citizens and small businesses. The ECB welcomed the committee's position in a statement.

The European Union is not alone in developing a public digital currency. China has already introduced its digital yuan, and Russia has announced its digital rouble will become operational in September 2026. The United States has taken a different approach: President Donald Trump abandoned plans for a central bank digital currency and instead backs stablecoins. Some policymakers and former officials believe a US digital dollar may eventually return to the agenda.

The European Parliament is expected to formalise the committee's position during a plenary vote in Strasbourg in early July, after which negotiations with the 27 EU member states will begin, with the aim of reaching a final agreement by the end of the year.