Euro-area finance ministers agreed on a key step in their efforts to roll out a digital currency, adding impetus to a project that’s becoming an important counterweight to US stablecoins.
The Eurogroup on Friday reached an accord on the process for setting holding limits for the digital euro. Spanish Economy Minister Carlos Cuerpo said a wider a deal on the initiative among European Union member-states is achievable in 2025.
Cuerpo said the bulk of the work is done, suggesting some movement on a project that’s championed by the European Central Bank but is being held up by lawmakers.
The latest agreement “was from my perspective a good step in the direction that we hope will be completed in as short order as possible,” ECB President Christine Lagarde told reporters in Copenhagen.
After launching its digital-euro push in 2021, the ECB is still awaiting the necessary legal framework. Officials in Frankfurt are demanding progress on the project, wary that dollar-backed stablecoins embraced by Donald Trump could gain a foothold in Europe. They’re also still uncomfortable with the region’s reliance on firms like Visa and PayPal for retail payments.
“We need to send a very strong political message that this is one of the top political priorities,” Spain’s Cuerpo said.
While an accord among member-states would be an important milestone for the digital euro, approval would still be needed from the European Parliament, plus a final deal between lawmakers and the Council.
In parliament, however, things remain stuck. The European People’s Party still favors a private solution, with EPP member Markus Ferber even calling this month for the project to be started all over again, saying “so much has changed that the ECB and the commission must go back to the drawing board.”
Commercial banks, meanwhile, are concerned over the threat to their role as intermediaries in transactions, as well as the risk that deposits could flow out to the digital currency — despite limits on customer holdings and it not paying any interest.
Before the ECB proposes where that ceiling is set, it will announce the envisaged launch date for the currency itself following talks with EU leaders, according to people familiar with discussions on the process who asked not to be identified. There’ll then be a maximum of six months for member-states to decide on or amend the limit. The whole process should take about two years.
Lagarde said it’s “premature” at this point to speak about where the holding threshold may end up.
The ECB has also has sought to address privacy worries, including through the development of offline transactions that wouldn’t be traceable and could provide a level of anonymity very close to cash.
Speaking before the Eurogroup convened in the Danish capital, European officials called for more rapid steps toward a digital currency.
Europe is “becoming more self-confident” and must “move forward with the digital euro,” German Finance Minister Lars Klingbeil said.
European Commissioner Valdis Dombrovskis also urged for the process to be accelerated, saying the continent has to become more independent from foreign payment systems.
Belgian Finance Minister Vincent Van Peteghem said he’s convinced the project would be a valuable asset for the region.
“It’s necessary that the digital euro plays an important role in the world,” he said.