EU Council Approves Digital Euro Framework and Cash Protection

Historic Agreement Paves Way for Digital Euro by 2029

In a landmark decision on December 19, 2025, the Council of the European Union has reached a crucial agreement on the future of Europe's currency. The Council established its official negotiating position on two parallel initiatives: the introduction of a digital euro and measures to strengthen the legal tender status of physical cash. This dual approach represents a balanced strategy to modernize Europe's monetary system while ensuring financial inclusion for all citizens.

The Digital Euro: A New Era for European Payments

The digital euro, a central bank digital currency (CBDC) to be issued by the European Central Bank (ECB), would complement existing cash and provide a secure, public digital payment option. According to the Council's position, the digital euro would be available to both individuals and businesses across the euro area, functioning both online and offline. 'The digital euro is an important step towards a more robust and competitive European payment system, and can contribute to Europe's strategic autonomy and economic security, as well as a strengthened international role for the euro,' stated Stephanie Lose, Danish Minister for Economic Affairs.

The proposed digital euro would feature several key characteristics: high privacy protection, offline functionality for payments without internet connection, and coexistence with existing private payment systems like credit cards and mobile payment apps. To address financial stability concerns, the Council has proposed limits on how much digital euro individuals can hold, with specific caps to be determined by the ECB and reviewed every two years.

Protecting Cash While Embracing Digital Innovation

Simultaneously, the Council has taken decisive steps to safeguard the role of physical cash in the European economy. The agreement clarifies that euro cash remains the only legal tender in the euro area and introduces measures to ensure its continued acceptance and availability. 'Europe's strategic autonomy must be strengthened, including in the payments sector. The proposal for a digital euro is specifically aimed at enhancing the resilience of the payments infrastructure in the euro area,' emphasized Morten Bødskov, Danish Minister for Industry, Business, and Financial Affairs.

The cash protection measures include banning non-acceptance of cash by retailers and service providers (with limited exceptions for online and unmanned sales), requiring member states to monitor cash acceptance and access, and establishing cash resilience plans for situations where electronic payment systems fail. This balanced approach acknowledges that while digital payments are growing, cash remains essential for many citizens, particularly the elderly and those in rural areas.

Technical Details and Implementation Timeline

The Council's position includes several important technical provisions. Payment service providers will be prohibited from charging consumers for basic digital euro services like opening accounts, making payments, or transferring funds between accounts. However, they may charge fees for added-value services. During an initial five-year transitional period, interchange and merchant service charges will be capped at levels comparable to existing payment methods.

The agreement also establishes a framework ensuring that digital euro service providers have fair access to mobile device hardware and software, preventing potential monopolistic practices by device manufacturers. According to the European Central Bank's timeline, if the Digital Euro Regulation is adopted by 2026, the first issuance could occur by 2029.

Strategic Implications and Next Steps

This agreement represents a significant step in Europe's digital transformation and strategic autonomy. By developing its own digital currency, the EU aims to reduce dependence on foreign payment systems and strengthen the euro's international position. The provisional green light from the Council now allows negotiations with the European Parliament to begin, with the goal of finalizing the legislative package in 2026.

The digital euro initiative responds to several challenges: declining cash usage, the rise of private digital currencies, and Europe's strategic vulnerability in payment infrastructure. As noted in the Reuters report, the offline functionality represents a particularly important feature for ensuring accessibility and privacy.

With this agreement, Europe positions itself at the forefront of central bank digital currency development while maintaining its commitment to financial inclusion through continued cash availability. The coming negotiations with the European Parliament will determine the final shape of Europe's digital currency future.