Digital Euro Explained: Holding Limits, Privacy and the Road to 2029

A retired teacher in Lisbon still pays at the market with coins. Her grandson in Munich has not touched a banknote in months, and every tap of his phone runs through a card network headquartered in the United States. The digital euro is Europe's attempt to give both of them a public, euro-native way to pay, and in 2026 it finally moved from theory into legislation.

Where things stand

The European Central Bank's Governing Council decided on 29 October 2025 to close the preparation phase and move into the next stage, focused on building technical capacity and getting ready for pilot transactions, as reported by TechRepublic. The ECB's target is to be ready for possible issuance in 2029, but only if EU law is in place.

That law moved forward in two steps this summer. The Parliament's economic and monetary affairs committee backed its position on 23 June 2026 by 43 votes to 14, with one abstention. Then, after three groups forced a plenary vote, MEPs approved the negotiating mandate on 9 July 2026 by 416 to 169, with 22 abstentions, according to Brussels Signal. Talks with the Council, which has already adopted its position, aim for a deal by the end of 2026.

Why Europe wants one

The argument that keeps coming back is sovereignty. ECB figures cited in the Parliament debate show Visa and Mastercard handling 61% of card payments in the euro area and nearly all cross-border card transactions. As cash use falls, that share of everyday spending running through non-European networks grows. A digital euro would give Europe a payment option that works across all euro countries, built and governed at home.

There is a resilience argument too. If a card network or a large processor goes down, as happens from time to time, a public option that also works offline gives shops and customers a fallback that does not depend on one private company.

The second argument is about cash itself. The same legislative package strengthens the legal status of banknotes and coins and would require member states to keep cash accessible. The pitch is a pairing, not a replacement.

Holding limits: the real fight

The question that has slowed everything is how much digital euro one person can hold. Banks fear that if people can move unlimited savings into central bank money, deposits will drain away, especially in a crisis. So there will be a cap.

The European Commission would set the individual limit after ECB advice and review it regularly. No figure is in the law yet. ECB analysis has found that limits of up to €3,000 per person would not threaten financial stability even in extreme scenarios, and Eurogroup finance ministers agreed in September 2025 on how the limits should be governed. Businesses would generally not be allowed to hold large balances, but could keep incoming payments for up to 24 hours. The digital euro would pay no interest and charge none, so it is a way to pay, not a place to save.

The holding limit is where monetary policy meets the kitchen table.

Privacy and offline payments

Privacy is the issue most voters raise. The draft framework, as summarised by Crowdfund Insider, follows privacy by design and by default. The ECB would not see who is paying whom; identifying data stays with the bank or provider that runs the wallet.

Offline payments go further. They would run device to device using secure local storage, with no internet connection, and are meant to offer something close to the privacy of handing over cash. They would also be free.

There was a moment this year when the whole design nearly shrank to offline only. The lead rapporteur, Fernando Navarrete, had pushed that idea before dropping it in March 2026, Euronews reported, clearing the way for a version that works both online and offline.

What it costs, and who pays

• Users: basic services such as opening a wallet, holding funds and paying would be free.
• Merchants: most would have to accept it, with exemptions for very small businesses that take no other electronic payments. Fees would be capped and should not exceed what retailers pay for comparable electronic methods.
• The Eurosystem: roughly €1.3 billion to build the infrastructure and about €320 million a year to run it after launch.
• Banks: estimated investment of €4 billion to €5.8 billion across the sector.

Distribution would run through banks, e-money firms, post offices and certain regulated crypto-asset service providers.

What changes at the till

For a café owner in Lyon or a bakery in Valencia, the most important line in the draft is that merchant fees should not exceed what they pay for comparable electronic payments, with caps in place. Card acceptance is one of the larger costs for small European retailers, and they have little bargaining power with the international schemes. A public alternative with capped fees gives them leverage, even if most customers keep using cards.

Acceptance would be compulsory for most businesses, which is how a new payment method avoids the chicken-and-egg problem of shops waiting for customers and customers waiting for shops. The exemption for micro-businesses that accept no other electronic payment protects the market stall that only takes cash.

The timeline

1. End of 2026: target for a political deal between Parliament, Council and Commission.
2. Mid-2027: earliest start of pilot transactions with payment providers and merchants.
3. At least 24 months: rollout period for banks, merchants and the public once the law is in force.
4. 2029: the ECB's stated target for first issuance.

Our take

We think the digital euro's success will depend less on technology and more on whether it feels useful on an ordinary Tuesday. A free, euro-wide payment option that works offline is a real improvement for travellers, small shops and anyone without a credit card. A capped balance with no interest is unlikely to excite savers, and it is not meant to. For a broader comparison with other forms of digital money, see stablecoins vs CBDCs vs tokenised deposits, and for Europe's crypto rules, our MiCA explainer.

About this researchMuffinPay InsightsIndependent analysis of stablecoins, CBDCs, cross-border payments and digital public infrastructure. Every figure is linked to its source. Read our editorial standards →