The European Parliament has endorsed the introduction of a digital euro that would function both online and offline, overturning a previous proposal for an offline-only version. This decision aligns with the stance of the European Central Bank, making the launch of a dual-function digital euro more likely.

The amendment passed by the parliament on Tuesday sets the stage for crucial upcoming discussions in the Economic and Monetary Affairs Committee. Echoing earlier progress, EU member states had already reached a common position on the digital euro project in December of last year, and this parliamentary vote aims to finalize its formal stance.

In a statement, the European Parliament emphasized that a digital euro is vital for safeguarding the monetary sovereignty of the EU, reducing external dependencies in the retail payments sector, and reinforcing the unity and autonomy of the single market. The statement further noted that if the digital transformation of payment systems is primarily led by non-EU entities, it could expose European users and merchants to new systemic risks.

The European Central Bank is advancing the digital euro project with the goal of reducing reliance on payment companies such as Visa and Mastercard. If the subsequent legislative process proceeds smoothly, the ECB is expected to launch a pilot in 2027, with a plan for a full rollout in 2029.

The parliament's position marks a shift from a report issued last October by rapporteur Fernando Navarrete, which had recommended launching only an offline version unless users could not independently meet their online payment needs. However, Tuesday's vote overturned that proposal, instead supporting the ECB's preferred model of combined online and offline functionality.

The Economic and Monetary Affairs Committee is expected to vote on the proposal in early May. European Central Bank Executive Board member Piero Cipollone, a proponent of the dual-function version, has stated that the online and offline features would complement each other, creating a digital currency experience closer to that of using cash.

A key motivation for the ECB's push for a digital euro is to decrease dependence on external providers for European payment systems, an objective that has gained urgency amid strained transatlantic relations. However, the project still awaits the completion of the necessary EU-level legislative process to establish a legal framework.

The European Parliament stressed that a digital euro is a crucial instrument for strengthening the EU's monetary sovereignty. As payment systems undergo rapid digital transformation, the EU must ensure its payment ecosystem is not dominated by non-EU actors, thereby avoiding new external dependencies and sovereignty risks in critical financial infrastructure.