Brussel lawmakers brace for intense debates over ECB’s digital euro this session

The European payments system is dominated by US giants Visa and Mastercard. In the second half of 2023, more than two-thirds of card payments in the euro area were processed through international networks, draining millions from European consumers and small businesses. The proposed digital euro, a central bank digital currency (CBDC), is meant to provide a public alternative to cash — but it has triggered resistance from banks and right-leaning politicians.

The project would establish a Europe-owned payment network, breaking reliance on foreign card operators and dollar-based digital currencies. International providers not only impose steep transaction fees but according to an article by Finance Watch also leave the EU’s payment infrastructure vulnerable to outside political pressures.

The arrival of digital assets like US-backed stablecoins has heightened the urgency of a European response. Issuers based outside Europe are preparing to roll out stablecoins across the eurozone, while the US Congress is moving forward with legislation such as the GENIUS Act and the STABLE Act to legitimize digital dollars. 

Critics say these bills prioritize industry profits over financial stability by failing to impose strict safeguards. By mainstreaming stablecoins, they risk embedding dollar-backed digital currencies deeper into Europe’s financial system, expanding foreign influence over payments and reinforcing reliance on American financial companies.

Stablecoin transactions have already exploded. Transfers surged to $27.6 trillion in 2024, surpassing Visa and Mastercard, driven largely by cross-border payments and crypto trading.

The European Central Bank (ECB) now frames the digital euro as a strategic shield against both foreign dominance and unstable private currencies. If designed correctly, it would be secure, accessible to all, and — unlike stablecoins — backed directly by the ECB.

EU countries are working to strike a final deal on the currency’s design before the year ends. ECB leaders will also make their case later this month in Copenhagen, when EU finance ministers and central bankers convene.

Yet, as an article by Politico notes, the ECB’s bigger worry may be Spanish EU lawmaker Fernando Navarrete, who is overseeing the project’s legal framework in Parliament. Navarrete has branded the digital euro “a last resort” and “a nuclear threat” meant to strong-arm the industry into creating a cross-border system before lawmakers are ready to pass the bill.

Bankers and financial groups echo that skepticism, dismissing the project as “a solution looking for a problem.” They argue they will be forced to bear the costs of new infrastructure and warn the rollout could freeze innovation by locking in one vision of Europe’s payment future.

Although Parliament is drafting the legislative framework, the ECB must also contend with the Council of the EU, where national governments hold sway. Council officials want the final say over how many digital euros individuals can own at one time, hoping to ease banks’ fears of mass withdrawals.

Another unresolved fight centers on whether lenders should receive compensation for distributing digital euros and adapting their payment systems so that virtual banknotes can be used at everyday checkout counters.

By Nazrin Sadigova