The European Parliament's recent vote on digital euro rules represents a key advance for public money and a sovereign payment system fit for the digital era.

The aim is straightforward: allow citizens the option to hold and spend the safest money - public central bank money - in digital form.

Yet heavy bank lobbying has notably diluted this public-focused vision over recent years.

The co-legislatures' drafts now balance public-good money against private aims to keep bank control over money and payments.

The danger: if talks favor banks too much, users will simply ignore the digital euro.

How banking interests influenced the legislative path

The European Central Bank created the digital euro as a logical extension of its role issuing cash.

Without a clear political mandate from the start, the initiative became open to bank influence.

Once laws were required, drafting went to DG FISMA, the Commission unit handling financial rules - a body with a known history of close ties to private banks.

The Commission's 2023 draft acknowledges that missing digital public money could weaken trust in the euro, yet it narrows the digital euro from full money to just a payment tool.

Bank deposit-flight warnings?

This approach mirrors the banking sector's main worry: digital public money competing with deposit models.

Banks frame their concern as a stability threat, claiming deposits would leave the system.

Evidence does not back this claim: the digital euro earns no interest, so large shifts are unlikely; people already hold wealth in cash, gold, crypto and securities; and the ECB can curb outflows or support sound banks if needed.

Moreover, the digital euro can only succeed if it draws users, which means some competition with deposits is unavoidable.

A close look at the drafts shows the Council most strongly backs bank priorities, while the Commission and Parliament seek a middle path. Four design points in trilogue talks will decide uptake and public value.

Holding limits

All three texts treat caps on digital euro holdings as fixed, so talks will focus on who decides the amounts.

The Council routes decisions via finance ministers, which risks national bank lobbying.

The Commission assigns calibration to the ECB, which is more shielded from national pressures, but skips extra democratic checks.

Parliament's method best protects public interest: the Commission acts on an ECB proposal, with oversight from Parliament and Council, plus a fallback allowing the ECB to set limits if talks stall.

Still, the end goal should be removing limits over time, letting people use the digital euro as freely as cash. None of the texts set this path.

Public distribution of last resort

As a public good, the digital euro requires a true public distributor of last resort when private firms cannot provide access.

Negotiations must guarantee this backstop reaches everyone, including vulnerable groups and those who prefer not to use a commercial bank.

Funding and defunding

To attract users, people need to move money into a digital euro account from any bank, not only the same provider.

Parliament and Commission treat this as a free basic service. The Council, however, lets banks block cross-provider links, creating extra costs or delays for users whose salary is at another bank.

Privacy

Take-up will hinge on confidence that spending data stays private and is not monetised.

Bank payments today are visible to the bank, which uses the data commercially.

The digital euro can improve on this. Two rules must remain: the Council's ban on the ECB identifying users from settlement data, and Parliament's requirement that offline transaction data is not shared with the ECB or the bank without clear consent.

The digital euro is a rare opportunity to restore access to public money and create a sovereign payment system for the digital age. Trilogue negotiators should not waste it by building a tool that puts banks first and the public second.

The goal is clear: create a European public good that people actually want to use.