The digital currency is expected to launch by 2029, in a push to bolster European autonomy in payments away from the dominance of the US dollar.
The European Parliament's Economic and Monetary Affairs Committee approved the long-awaited digital euro on Tuesday, as the EU seeks to reduce its reliance on US-controlled payment systems.
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According to European Central Bank (ECB) data, US payment giants Visa and Mastercard account for 61% of card payments in the euro area and almost all cross-border card transactions.
The debate over Europe's financial sovereignty has gained momentum amid growing geopolitical tensions and concerns about the bloc's dependence on foreign payment infrastructure.
The digital euro is one of the measures put forward to strengthen Europe's strategic autonomy. It would be a digital form of central bank money, issued and backed by the ECB, designed to complement cash and existing banking services rather than replace them.
Under the proposal, consumers would be able to hold digital euros in a dedicated wallet, subject to a holding limit that has yet to be determined.
The system would support both online and offline payments and is intended to offer a high degree of privacy, with the ECB unable to directly identify users from their payment data.
The ECB would provide the underlying infrastructure, while commercial banks and payment service providers would offer digital euro services to customers. Financial institutions are expected to be compensated for their participation in the scheme, while merchants will pay fees that are expected to be lower than those associated with current card transactions.
How that compensation should be structured remains one of the most contentious issues ahead of negotiations with EU member states, according to three sources familiar with the discussions.
"We welcome that the European Parliament's ECON Committee has agreed on its position on the single currency package, which will safeguard euro cash as legal tender while also shaping the digital euro," the ECB said in a statement.
"The approval of the regulation on the digital euro is a major victory for citizens and small businesses," said the Italian MEP Pasquale Tridico, who negotiated the file on behalf of The Left group, describing the vote as "historic".
The European Union is not alone in developing a public digital currency. China has already introduced its digital yuan, while Russia has announced that its digital rouble will become operational in September 2026.
The United States has taken a different approach. President Donald Trump has abandoned plans for a Federal Reserve-issued central bank digital currency and instead backed the development of stablecoins — privately issued crypto assets designed to maintain a stable value.
Because the vast majority of global stablecoins are denominated in US dollars, supporters argue that the technology could reinforce the dollar's international role and expand its use in cross-border payments.
Nevertheless, some policymakers and former officials believe a US central bank digital currency could eventually return to the agenda.
Timothy Massad, former chairman of the Commodity Futures Trading Commission (CFTC), told CoinDesk in May that discussions continue in Washington and suggested that a digital dollar may ultimately prove unavoidable.
The European Parliament is expected to formalise the committee's position during a plenary vote in Strasbourg in early July.
Negotiations with the EU's 27 member states would then begin, with lawmakers aiming to reach a final agreement before the end of the year.
