Europe’s digital euro debate is narrowing to a deceptively simple political question: how close can a public digital payment instrument get to the privacy of cash without weakening anti-money-laundering controls. That tension, highlighted again this week in the crypto press, is increasingly shaping the contours of the legislative talks in Brussels.
The emerging compromise is not “full anonymity” versus “full traceability”. It is a two-track model in which cash-like privacy is delivered primarily through offline payments, while online payments remain subject to the compliance checks that underpin Europe’s financial crime regime.
Offline privacy is becoming the political anchor
The European Central Bank has repeatedly framed offline digital euro payments as the closest functional equivalent to cash. In its public explainer on privacy, the ECB says offline payments would be known only to the payer and the recipient, and would work without an internet connection.
The ECB has also set this promise into its broader “digital cash” narrative. In its June 2024 progress update, it states that offline functionality would offer users a cash-like level of privacy, and that offline payments would not involve sharing personal transaction data with payment service providers or the Eurosystem.
This matters politically because it gives lawmakers a credible way to claim the digital euro will preserve a space for private everyday transactions, even if online use cannot mirror cash anonymity under current rules.
The online question is where the fight moves
Where negotiations tighten is the online environment, where payment flows pass through intermediaries and where AML obligations bite. Reuters reported on 19 December 2025 that EU member states endorsed a negotiating stance supporting both online and offline functionality, contrasting with earlier arguments that an offline-only approach would better protect privacy.
That Council position signals the direction of travel: the digital euro is being designed as a mass-market instrument usable online and in shops, not a niche offline-only product. But it also forces Brussels to define what “privacy” means in an online CBDC world where compliance, fraud prevention, and sanctions enforcement are non-negotiable features of the EU financial system.
One likely outcome is that privacy becomes less about hiding transactions from the system entirely, and more about minimising data collection and limiting who can see what. The ECB’s own public communications emphasise data protection and restricted access at infrastructure level, alongside intermediaries’ role in compliance.
Why holding limits keep returning to the centre
Privacy debates also intersect with holding limits. The same Reuters report notes the Council’s emphasis on limits as a financial stability safeguard, with reviews over time. A capped instrument supports the “means of payment, not a store of value” framing, which in turn makes it easier politically to argue for stronger privacy in low-risk, everyday use cases.
The next stretch of negotiations will therefore revolve around calibration: how to make offline privacy meaningful in practice, how to constrain and govern data use online, and how to justify limits without undermining the digital euro’s usefulness.
For a deeper background on how the ECB has been framing privacy and core design features, see Digital Euro News coverage of the ECB’s technical annex discussion.