The ECB's digital euro passes its toughest political test. Trilogue negotiations begin with a target of 2026 adoption. Crypto firms licensed under MiCA can serve as distributors.
The European Parliament's Economic and Monetary Affairs Committee approved draft digital euro legislation on June 23, pushing the project past its most serious political test yet. The vote clears the way for trilogue negotiations among the European Parliament, EU member states, and the European Commission. The three institutions target final adoption by the end of 2026.
The European Central Bank has been working on the digital euro since 2021. It plans a 12-month pilot in the second half of 2027. If all goes well, the first digital euro could be issued by 2029.
The approved framework mandates both an online and an offline version. The offline version is designed to match the privacy of physical cash. The digital euro will carry no interest. Merchants must accept it. Individual wallets will have holding limits, though the exact caps have not been published.
How the digital euro reaches users is where the legislation gets interesting. Distribution will not run through the ECB alone. The framework lays out a layered system: banks, payment service providers, e-money institutions, and regulated crypto asset firms can all serve as distributors. Crypto firms licensed under MiCA, the EU's Markets in Crypto-Assets regulation, are explicitly included. That creates a scenario where crypto companies compete directly with traditional banks to onboard users onto a government-issued currency.
For stablecoin issuers operating in euros, the digital euro is a direct competitor. The non-interest-bearing design and holding limits are meant to reassure commercial banks that their deposit bases will not be cannibalised. Stablecoins that offer yield or no holding limits may still have a use case. What is a yield-bearing stablecoin? A 2026 guide covers the competitive dynamics in more depth.
The legislation also addresses the EU's reliance on Visa and Mastercard for electronic payments. Most eurozone payment flows currently run through American-controlled infrastructure. A digital euro distributed by a mix of banks and crypto firms could reduce that dependency over time.
Fernando Navarrete Rojas, the lead rapporteur for the proposal, has shepherded the legislation through Parliament. His role will continue as trilogue talks begin.
The next concrete milestone is the end of 2026, when the legislation is expected to be finalised. From there, market attention will centre on two things: the holding limits that emerge from trilogue negotiations, and which crypto firms apply to become digital euro distributors. Those details will determine how competitive the digital euro looks alongside existing stablecoins.
Related: Digital Euro Clears Key EU Hurdle as ECON Committee Votes Yes
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