The European Parliament’s rapporteur for the digital euro, Fernando Navarrete Rojas, advocates for a two-pronged introduction of the digital single currency. The member of the conservative European People’s Party (EPP) group clearly opposes unconditional online use. According to his own statement, his position is based on the need to strengthen the EU’s strategic sovereignty, reduce dependence on non-European payment providers, and simultaneously ensure financial stability and citizen data protection.
In his long-delayed drafts for amendments to the EU Commission’s proposal for a relevant legislative package, which are available to heise online, Navarrete Rojas fundamentally distinguishes between two forms of the digital euro: the offline and the online version. He describes the offline variant as a non-account-based, tokenized form of digital cash. It is issued by the European Central Bank (ECB), stored locally on secure devices, and functions via “device-to-device” payments (peer-to-peer) without requiring a central clearing infrastructure.
According to the former Spanish central banker, this concept offers maximum resilience, as transactions are possible even during network outages or in crisis. Crucially for him, the offline euro offers data protection comparable to cash: payments do not need to be routed through or recorded by a central infrastructure. By replicating cash-like features – such as the absence of digital euro accounts – the risks to financial stability would also be reduced.
Online functions are up in the air
In contrast, there is the online digital euro, which, as an account-based internet payment system, requires a digital clearing infrastructure operated by the ECB. This form naturally carries the risk, as Navarrete Rojas points out, of replacing commercial banks, causing deposits to flow out, and entering into direct competition with existing private European payment solutions.
Therefore, the negotiator proposes to make the introduction of the online digital euro conditional: it should only be introduced if a market test conducted by the Commission reveals that no pan-European, sovereign solution for retail payment transactions, such as payments between individuals, at the point of sale, and in e-commerce, is available.
Navarrete Rojas thus wants to prevent efficient and scalable private market solutions from being displaced. He explicitly names strengthening existing European private approaches such as the European Payment Initiative (EPI) as a priority objective. The EPI is working on a European payment infrastructure that is resilient, universal, and can be used cross-border under favorable conditions. However, it did not initially achieve these goals.
Offline variant should be usable like cash
For the acceptance of the offline variant, privacy protection is absolutely essential, the paper states. Measures to combat money laundering and terrorist financing must apply at the user level and must not be carried out by labeling individual digital units. This is intended to ensure the fungibility of money and prevent the creation of programmable or traceable money. The ECB should also ensure that fraud and counterfeiting remain below the level of comparable payment instruments.
In order not to undermine financial stability, holdings of a potential online digital euro for natural persons should be subject to holding limits according to the plan, in order to prevent significant outflows of customer deposits. For example, each relevant digital account could be automatically linked to a traditional bank account set by the user to monitor these limits and ensure payment continuity. In order not to disproportionately burden payment service providers, online users should only be able to automatically top up or dissolve their accounts if they are managed by the same service partner.
Overall, for both variants of the digital euro, the introduction must be evaluated based on clearly defined problems and compared with the best available market alternatives in terms of necessity, proportionality, and opportunity costs, the rapporteur emphasizes. The amendments he has proposed would create a legal framework that would immediately enable the introduction of the data-protection-friendly and resilient offline currency as legal tender.
Criticism: Only for the counter
Damian Boeselager (Volt), who negotiated the dossier for the Greens group, criticizes the report as being too hesitant in its content. The offline variant favored by Navarette Rojas would undermine Europe’s independence because the online payment space would continue to be left to private, mostly US-American systems like Visa and Mastercard. Given the global political risks that a paralysis of payment systems by Washington could entail, decisive action is needed.
An offline solution would “only work at the counter – not in online retail, where almost half of all consumers pay by card,” Boeselager complains. Holding limits would also severely restrict the everyday usability of the digital euro. The legislative initiative will now be debated in the lead committee for economic affairs and is expected to be adopted by Parliament in the spring.
(nen)
