Central Banking | Business | Legislation

The Strategic Imperative

On June 23, 2025, ECB President Christine Lagarde addressed the European Parliament, urging speedy passage of legislation to enable a digital euro—a central bank digital currency (CBDC) intended for everyday use like an online wallet for euro-area residents (reuters.com).

• Monetary sovereignty: Lagarde sees the digital euro as a bulwark against privately issued stablecoins—whose rise could threaten monetary policy and financial stability (reuters.com).
• Resilience and independence: The move aims to reduce reliance on foreign payment infrastructure and protect European data under EU legal standards (cointelegraph.com).

Legislative Timeline & ECB’s Next Steps

• Early framework: The European Commission proposed the Digital Euro Regulation in June 2023, laying out features such as offline usability, privacy safeguards, legal tender status, and mandatory acceptance by merchants (reuters.com).
• Preparation in progress: Since October 2023, the ECB has entered its “preparation phase,” drafting the technical rulebook, tendering for private wallet providers, and designing AML/CFT-compliant payment systems (mondaq.com).
• Urgency flagged: Lagarde emphasized that the ECB Governing Council plans a decision in autumn 2025, contingent on legislation being finalized (reuters.com).
• Projected launch timeline: ECB board member Piero Cipollone has hinted at legislative wrap-up by early 2026, with rollout following in 2–3 years—potentially operational by 2028 (reddit.com).

Privacy, AML/CFT & Financial Stability Considerations

Privacy by design
The ECB—backed by the EDPB and EDPS—commits to strong privacy measures, including offline transactions with cash-like anonymity, pseudonymisation, and decentralized data storage (edpb.europa.eu).

AML/CFT balance
While users may enjoy privacy for low-value payments, higher amounts will be traceable under AML/CFT rules. Public feedback confirms that 43% of respondents most prioritize privacy (cnil.fr).

A Reddit user summed it up:

“What the respondents want most from a digital euro is privacy (43%)…” (reddit.com, reddit.com)

Banking sector impact
Banks worry that deposit migration from sight deposits to ECB-backed CBDC will destabilize liquidity. PwC estimates implementation costs for the banking system between €18 billion and €30 billion (reuters.com).

Technical resilience and trust
Concerns remain about system outages. Four political groups referenced last year’s ECB payment disruption when questioning readiness (reuters.com).

Key Legal Implications for Practitioners

• Urgency and sequencing: The autumn 2025 decision hinges on legislative adoption. Delay could stall the entire project.
• Privacy-AML compliance: Digital euro systems must embed privacy-by-design while meeting robust anti-money laundering standards.
• Regulatory complexity: Counsel will need to coordinate across multiple layers—ECB rulebook, EU Regulation, GDPR, AML Directive, and national laws.
• Risk mitigation for banks: Financial institutions should assess CBDC impact on deposits, liquidity, and technology infrastructure, preparing strategic responses.

Looking Ahead

With the legal framework still in sviluppo, Parliament’s upcoming votes and potential CJEU scrutiny will be decisive. Meanwhile, legislation must embed:

• A privacy threshold for low-value transactions (reddit.com, edpb.europa.eu).
• Clear distribution responsibilities across PSPs vs. ECB/NCBs (herbertsmithfreehills.com).
• Safeguards ensuring no commercial use of user data (ecb.europa.eu).

Conclusion

Legislators are now the gatekeepers: without legal clarity by autumn 2025, the digital euro could stall. The clock is ticking.

For legal professionals in fintech, data protection, or finance, aligning technical architecture with legislative and regulatory demands is imperative. Early preparation can secure trust, ensure compliance, and protect financial stability.