Digital Euro Gains Offline Privacy Mode Approval

EU policymakers have taken a key step toward a new form of central bank money, as political agreement crystallizes around the digital euro project and its dual online‑offline design.

Council position clears way for negotiations

The European Union has approved its formal stance on legislation enabling the European Central Bank to issue a digital form of the euro, including an offline version that works without internet access. However, the move, announced in a document released on Friday, does not yet authorize actual issuance.

Instead, the Council position opens the door to detailed talks with the European Parliament, sharpening long-running debates over privacy, resilience, and political oversight. Moreover, the text confirms that any launch would feature both online and offline payment options from day one.

EU officials argue that this two-track architecture is designed to keep central bank money relevant in an increasingly digital economy, while preserving key attributes traditionally linked to cash. That said, the political focus remains firmly on how privacy and control will be balanced in practice.

ECB groundwork and offline architecture

On the technical side, the ECB has completed most of its preparatory work after a two-year investigation phase that ended in October 2025. During this period, central bank teams and industry stakeholders assessed design choices for both online and offline payment rails.

Much of the public debate now centers on the offline option and its privacy implications. Under the ECB’s current concept, offline payments would allow two users to transfer digital euro tokens directly between certified devices, such as smartphones or smart cards, with transaction details visible only to the payer and payee.

Only the funding and defunding operations of an offline wallet would be recorded in back-end systems. According to the central bank, this structure should offer a level of confidentiality comparable to cash for low-value payments, while still enabling basic oversight of the overall stock of digital money.

Privacy limits and data protection concerns

Regulators and privacy experts, however, have flagged technical limits to what offline systems can guarantee. The European Data Protection Board has warned that enforcing physical proximity in a digital environment is inherently difficult, particularly because relay attacks could theoretically extend near-field communication signals over the internet.

The board concluded that physical proximity, a defining feature of cash transactions, cannot be reliably ensured in any digital currency architecture, even when safeguards and certified hardware are deployed. Moreover, these constraints mean the offline model cannot fully replicate the anonymity of banknotes and coins.

As a result, the offline version is described by EU institutions as highly private, but not entirely anonymous in the same way as physical cash. That said, policymakers claim it still marks a significant step toward stronger confidentiality compared with many existing electronic payment methods.

Online payments and data handling

The online component is designed to support everyday digital transactions, including e-commerce and remote payments across the euro area. For these online use cases, the ECB would only process pseudonymized data, meaning that individual payments could not be directly linked to specific persons within central bank systems.

Banks and other payment service providers would see only the data they need to comply with EU anti-money laundering and counter-terrorist financing rules. Moreover, they would be explicitly barred from exploiting payment information for commercial purposes without prior user consent, reinforcing existing data protection standards.

Central bank officials have repeatedly stressed that the ECB has no interest in monetizing transaction data or building detailed profiles of users. Instead, they frame the online rail as a public backbone that can interoperate with private-sector solutions, while keeping core account and settlement infrastructure under public control.

Resilience, inclusion and offline use cases

Beyond privacy, the online and offline variants are intended to address distinct practical needs. The offline configuration is conceived as a resilience tool, enabling payments to continue during network outages, cyber incidents, or localized power disruptions that affect traditional electronic systems.

Moreover, offline functionality is expected to support financial inclusion by giving people without stable internet access a way to use central bank money in digital form. For example, individuals in rural areas or those relying on older devices could still make and receive low-value payments via local connectivity between certified hardware.

The online rail, by contrast, is meant to integrate smoothly with existing digital infrastructure. It aims to offer convenience, robust security, and compatibility with private payment schemes operating throughout the eurozone, while creating a common standard that can be used at physical points of sale and in online environments.

Holding limits, fees and access to devices

The Council’s stance also outlines the emerging digital euro regulatory framework, including measures to protect financial stability. To limit large-scale deposit migration from commercial banks to central bank balances, the legislation would cap how many digital euros individuals can hold in their wallets.

Under the proposal, consumers would not pay fees for basic services, such as opening and maintaining a wallet or making standard everyday payments. However, additional or premium services offered by intermediaries could be priced, allowing banks and other providers to build sustainable business models around the new infrastructure.

The framework would further require device manufacturers to grant payment providers fair and non-discriminatory access to hardware and software components needed to run digital wallets. This includes access to secure elements, operating systems, and interfaces on smartphones or smart cards, ensuring that no single player can lock out competitors.

Next steps for EU lawmakers and the ECB

With the Council position now formalized, attention turns to negotiations with the European Parliament, which will shape the final legislative text. Moreover, lawmakers will need to address outstanding questions on governance, technical standards, and long-term oversight of the system.

Only after the legal framework is in place would the ECB decide whether to move from preparation to actual issuance, a step that would require separate political approval. That said, officials emphasize that the current work is about keeping options open as payments and technology continue to evolve rapidly across Europe.

In summary, the EU’s push toward a potential central bank digital currency is entering a decisive phase, with online and offline features designed to balance privacy, resilience, financial inclusion, and financial stability in a single, integrated system.