The EU is set to take a major step towards launching a digital version of the euro, despite facing criticism from various quarters. Central banks around the world have been exploring or implementing digital currencies as electronic payments gain popularity and cash usage declines. The idea of a digital euro was first suggested by the European Central Bank (ECB) President Christine Lagarde in 2020, leading to a public consultation. Supporters of the digital euro argue that it would complement cash and prevent non-European players or other central banks from filling a potential gap. However, critics question the necessity of a digital euro and banks have raised concerns about potential risks. German MEP Markus Ferber commented that the digital euro seems to be a solution in search of a problem. The European Commission is set to publish a proposal that will serve as the legal foundation for the ECB to launch a digital euro. The proposal will need to be approved by the EU’s 27 member states and the European Parliament. The ECB is expected to give formal approval for a digital euro in October, with an anticipated availability date from 2027 onwards. According to a draft proposal seen by AFP, the European Commission believes the long-term benefits of a digital euro outweigh its costs and warns of the potential large costs of not taking action. The digital euro would be available to individuals within the euro area and visitors. Lagarde has highlighted the importance of a digital currency for resilience and to safeguard European payment autonomy. She noted that many means of payment are not necessarily European, and relying on a single source of payment is unhealthy. Currently, US giants Visa and Mastercard dominate the global card payment market. The EU’s plans to launch a digital euro have raised concerns, particularly among banks. The European Banking Federation (EBF) has warned of significant risks, such as potential bank runs, as customers may hold their funds in digital euro accounts and wallets, moving them away from banks’ balance sheets. The draft proposal includes a provision to limit the amount of money individuals can keep in digital euros, with a suggested cap of 3,000 euros. The proposal also grants the digital currency legal tender status, meaning it must be accepted as payment. However, small businesses that do not accept any form of digital payment may be exempt. Privacy is a key concern for the ECB, as highlighted by the results of a public consultation. The ECB has assured that it would not attempt to control how people spend the digital euro or use it for surveillance, as critics claim is the case in China. The digital euro will be designed to minimize the processing of personal data by payment services providers and the ECB. The launch of a digital euro signifies the EU’s focus on reducing reliance on third countries and bringing production closer to or within the bloc. Despite the concerns and criticisms, the EU is moving forward with its plans for a digital euro that is expected to be available to the public from 2027.