EU Council Endorses Online and Offline Versions of Digital Euro

The Council of the European Union has solidified its position on the digital euro, backing a proposal that includes both online and offline functionality. This decision, made public on December 19, 2025, sets the stage for negotiations with the European Parliament on the legal framework for the central bank digital currency (CBDC). The Council's stance diverges from earlier proposals by the European Parliament, which had primarily focused on an offline-only model.

Under the Council's endorsed plan, the digital euro would be issued by the European Central Bank (ECB) and be accessible for use anytime and anywhere within the Eurozone, irrespective of internet connectivity. This dual functionality aims to provide maximum flexibility and resilience. The offline function ensures the digital euro can still be used during power outages or network disruptions, while the online variant supports a broader range of digital payment transactions.

Fernando Navarrete, the European Parliament's rapporteur for the digital euro, had advocated for an exclusively offline version, resembling a token-based digital cash system without account linkage. Navarrete argued that this approach would offer maximum data protection, similar to physical cash, as payments wouldn't need to be routed through or recorded by central infrastructures. He suggested introducing an online version only if the private sector failed to develop its own solution by 2029.

However, the ECB rejected this limited approach, asserting that restricting functionality would undermine the benefits of a central bank currency. The Council aligns with the ECB's assessment, emphasizing the importance of online access to support a wider array of digital payments. Online transactions would be processed immediately through the central bank's ledger or authorized intermediaries. Offline transactions, on the other hand, would be recorded locally and synchronized with the central ledger once connectivity is restored, providing cash-like privacy and enabling use in areas with poor internet access.

The ECB aims to introduce the digital euro to modernize the payment system and ensure central bank money remains relevant in an increasingly digital world. As cash usage declines, a central bank-issued digital currency is seen as a way to maintain monetary sovereignty and public trust in the currency.

To mitigate potential risks to financial stability, the Council proposes limiting individual holdings of digital euros. The ECB would determine these limits, subject to an overall cap reviewed every two years. Basic digital euro services would be offered free of charge, with fees only applied to value-added features. During a transition period of at least five years, settlement and merchant fees would be capped at levels comparable to existing payment methods, with potential adjustments based on actual costs thereafter.

The European Parliament must now develop its final position. Formal negotiations between the Parliament and the Council can then commence. If the legislators reach an agreement in 2026, the ECB could launch a pilot phase in 2027, with the first issuance of the digital euro to the public potentially occurring in 2029. The ECB is reportedly preparing the necessary technical capacity based on this timeline.

Despite the progress, the digital euro project faces resistance from parts of the banking sector. Some banks warn that a digital euro could undermine private-sector payment systems, arguing that it largely addresses the same use cases as private solutions without offering clear added value for consumers.

The Council also seeks to reinforce the role of cash alongside the digital euro. The Council aims to ban the non-acceptance of euro cash by retailers or service providers, with exceptions for online purchases.