Lawmakers stall digital euro bill, leaving future of €1.2bn project uncertain

Lawmakers in the European Parliament have stalled on creating a legal framework for the digital euro, essentially shelving indefinitely the controversial project.

The new European Parliament will decide after elections in June whether to start work on the bill from scratch, or make it a lower priority.

“One or several wallets, holding limits, transaction history — many questions are unsolved,” Stefan Berger, the German lawmaker leading negotiations on the digital euro, told DL News in an email.

“It is unlikely that [the Economic and Monetary Affairs Committee] will come to robust compromises before the end of term,” he added.

The MEP was also responsible for shepherding negotiations on the EU’s Markets in Crypto-Assets regulation.

Members of the economic committee were expected to vote on the legislative text early next week.

Lawmakers were stuck and made little progress in negotiations with disagreements on even the basics of potential uses, a source close to the matter told DL News.

Backlash and conspiracies

Plagued with privacy and financial stability fears the digital euro has seen backlash from the public as well as officials.

Top European Union officials have had to defend the proposal from conspiracy theorists.

The CBDC project sparked concerns that the central bank will have excessive power to survey the population and access sensitive data on individual spending habits.

European officials have many times tried to quell these concerns, stating that commercial banks hosting the digital euro wallet would be the intermediaries handling sensitive data.

Still, the benefit of a retail CBDC for Europeans remains unclear. Some lawmakers proposed scrapping the digital euro legislation altogether in the last amendments to the bill.

The European Central Bank is the engine behind the digital euro project, hoping to strengthen financial autonomy by creating a home-grown payment system to rival American payment giants like Visa.

At the start of the year, the ECB carved out €1.2 billion worth of contracts for the private sector to build the digital euro infrastructure.

But the ECB said that the project is on hold until European lawmakers have finalised the legislation.

Holding limits

Another point of contention for the digital euro is its thresholds. Individuals may not be allowed to hold more than €3,000 at a time, which critics say will limit its use.

Proponents say this feature is designed to protect financial stability by preventing bank runs. It also somewhat simulates the function of cash, they argue.

Right-wing swing

Experts expect the European elections starting June 6 to sway the parliament to the right, which is perceived as more friendly to the crypto industry.

In Europe, left-wing lawmakers proposed to effectively ban Bitcoin — a proposal which never came through.

Digital euro watchers anticipate that the likely more right-consolidated European Parliament post-elections will have an easier time agreeing on legislation for the digital euro.

Inbar Preiss is a Brussels-based regulation correspondent. Contact her at inbar@dlnews.com.