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EU ministers get say on launch, holding limit

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Debate on digital euro goes back six years

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Some concerned about stability risk

By Jacob Gronholt-Pedersen and Jan Strupczewski

COPENHAGEN, Sept 19 (Reuters) - European Union finance

ministers on Friday agreed on a roadmap for launching a digital

euro currency that aims to become an alternative to the now

dominant U.S.-based Visa and Mastercard ( MA ) systems.

Discussions on a digital euro, essentially an electronic wallet

backed by the European Central Bank, heated up this year because

the EU is now keen to reduce its dependence on other countries

in key areas like energy, finance and defence.

The ECB has pitched the digital euro as a way to cut

Europe's reliance on U.S. credit cards and as a response to U.S.

President

Donald Trump's

global push for stablecoins pegged to the U.S. dollar.

But the ECB, the main sponsor of the project, has

failed

so far to secure legislative approval for it, with

lawmakers and bankers complaining it may hollow out banks'

coffers, cost too much or curtail privacy.

In a sign of progress, EU finance ministers gathering with

ECB President Christine Lagarde and European Commissioner Valdis

Dombrovskis in Copenhagen on Friday reached an agreement on the

next steps.

This will give EU finance ministers a say on whether a

digital currency is issued and how many such euros each resident

will be able to hold, which is seen as crucial for assuaging

fears of a run on bank deposits.

"The compromise that we reached is that before the ECB makes

a final decision in relation to issuance...there would be an

opportunity for a discussion in the Council of Ministers,"

Paschal Donohoe, who chairs meetings of finance ministers, told

a joint press conference.

Donohoe, Lagarde and Dombrovskis also celebrated a

compromise on the procedure for setting the holding limit

although they didn't give details.

A participant at the meeting told Reuters the ECB will also

submit a proposed holding limit for approval by the European

Council of Finance Ministers.

DELAYS TO LEGISLATION

Though the European Commission proposed digital euro

legislation in June 2023, the other two institutions that have

to sign off on it, the European Parliament and the European

Council, have yet to do so.

The European Council aims to wrap up its side of the work by

the end of the year.

The ECB hopes to have the legislation in place by June,

after which it will need around two-and-a-half to three years to

actually launch the digital euro.

Some EU countries have their own national digital payments

systems, but none that would be accepted across the 27-nation

bloc.

"The digital Europe is not just a means of payment, it is

also a political statement concerning the sovereignty of Europe

and its capacity to handle payment, including on a cross-border

basis, with a European infrastructure and solution," Lagarde

said at the press conference.

(Writing by Francesco Canepa; Editing by Aidan Lewis and Sharon

Singleton)