Trade-offs between local institutions are expected to shape the digital euro’s final form, as debates continue over holding limits and privacy features.
The EU Council recently announced that it is backing the European Central Bank’s digital euro design, which includes both online and offline functions.
According to Apostolos Thomadakis, head of the financial markets and institutions unit at the European Policy Studies think tank, “cash-like privacy” with anti-money laundering rules is among the digital euro’s “hardest political tradeoffs.”
He told Cointelegraph that he expects the European lawmakers and the ECB to find a middle ground.
“Parliament will likely need to accept some form of online digital euro (at least for day-to-day retail use), while the [European Central Bank and EU Council] will need to concede on stronger, operationally enforceable privacy guardrails,” he told Cointelegraph.
The digital euro is the European Union’s planned central bank digital currency (CBDC). Discussions around CBDC developments have intensified globally, as policymakers weigh the rise of stablecoins alongside other pressures on existing systems.
Related: ECB eyes onchain settlements next year as lawmakers weigh digital euro privacy
Level of privacy still subject to change
A representative of the European Commission told Cointelegraph that while the institution “cannot speculate on the outcome of the deliberations,” there are some aspects that are unlikely to change:
“There seems to be general support across stakeholders for a number of key features of the Commission proposal, including the digital euro’s legal tender status, its offline functionality, strong privacy and data protection safeguards as well as financial inclusion-related aspects.“
Other aspects still subject to change, according to Thomadakis, include the level of privacy expected from the online digital euro, acceptance rules and exemptions, and service provider compensation details. Lastly, he said that the digital euro’s holding limits — aimed at preventing deposits from fleeing banks — have yet to be determined.
Mireia Llambrich Anto, financial services assistant at European consumer advocacy group The European Consumer Organization, pointed out that the current consensus is for an online-offline dual model that supports resilience and privacy, with holding limits to preserve the current financial system.
Anto told Cointelegraph that she expects privacy-enhancing measures and the assignment of legal tender status.
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CBDC developments accelerate
EU officials have long expressed concerns about the impact of stablecoins on their local markets.
In early September, ECB President Christine Lagarde urged EU lawmakers to close gaps in foreign stablecoin regulation, warning of redemption risks and euro outflows. An adviser to the European Central Bank previously called for global coordination to regulate stablecoins and prevent the US dollar’s dominance.
Thomadakis explained that if the legal work “slips materially beyond 2026, the ECB timetable breaks.”
This is because pilot projects and rollout rely on the implementation of a legal framework and “merchant acceptance obligations also cannot bite without the regulation in force.”
According to the Atlantic Council, at least 137 countries and currency union groups representing 98% of global GDP have explored a CBDC to some degree. The ECB’s digital euro aims to strengthen the euro’s international role, according to the think tank.
China’s digital yuan is often cited as one of the most advanced programs among major economies. The central bank of China has started allowing commercial banks to pay interest on its CBDC wallets starting 2026.
