On Tuesday 8 July, European finance ministers debated outstanding issues on the ‘digital euro’ legislative package with a view to reaching a political agreement in the Council of the European Union, which they hope to achieve by the end of 2025 under the Danish Presidency.
Several delegations, including Ireland and Slovakia, stressed the importance of ensuring that the digital euro complements cash and does not replace it in any way.
One of the political issues to be resolved concerns the EU-level decision to set the holding limit for a digital euro portfolio. The day before, the Eurogroup in inclusive format had discussed a proposal from its president, Paschal Donohoe.
On Tuesday, the latter reported that progress had been made the previous day thanks to strong support from countries for a proposal that seeks to balance the powers of the ECB, an independent monetary institute that will manage the digital euro on a day-to-day basis, and the EU Council, where European finance ministers intend to retain a say in a project designed to strengthen European sovereignty in a payments sector dominated by foreign countries, particularly the US. Mr Donohoe hoped that the Eurogroup would provide direction for the EU Council’s work in September.
For Luxembourg, the solution on the table is “a step in the right direction”, but it is “sceptical” about using a reverse qualified majority of Member States to reach a decision in the EU Council on setting the quantitative limit for holding a digital euro.
Portugal advocated involving the European legislator and an appropriate framework for the ECB’s “dual role” as financial actor and supervisor. The same goes for Malta, which wants to involve the EU Council, given the “strategic nature” of the future digital euro.
Lithuania stressed the importance of setting time limits to ensure that decisions are taken quickly. As for Cyprus, it felt that the ECB was “best placed” to set limits on holding digital euros in the EU without compromising financial stability, working closely with national central banks to apply these maximum thresholds.
The issue of which institution, between the ECB and the EU Council, will take the final decision to implement the digital euro project was not really addressed during the public debate. In February, the European Parliament considered such a decision to be a political matter (see EUROPE 13577/8).
Other issues to be resolved concern: the digital euro’s economic model, in particular to financially compensate the banking sector for its involvement in the project; and respect for the privacy of digital euro users (which cannot be as high as with cash), while maintaining a high level of anti-money laundering measures.
Following adoption of the ‘digital euro’ package, the ECB will need a further two and a half years to finalise the technical work involved in setting up the digital euro, according to European Commissioner for Economy and Productivity; Implementation and Simplification Valdis Dombrovskis.
See the previous Polish Presidency’s progress report on the EU Council’s legislative work regarding the digital euro: https://aeur.eu/f/hon (Original version in French by Mathieu Bion)