The European Union is moving toward one of the biggest changes to its payments system in decades, with the proposed launch of a digital euro potentially arriving by 2029. But before that can happen, lawmakers must overcome growing resistance from banks, privacy campaigners and some members of the European Parliament.

The digital euro would function as electronic cash issued by the European Central Bank, designed to complement physical banknotes rather than replace them. Under current plans, consumers would use a digital wallet for everyday purchases, both online and offline. Transactions made offline would offer a high degree of privacy, similar to cash.

If legislation is approved by the end of 2026, the new payment system could be available to consumers three years later.

The project has taken on added urgency as Europe seeks greater financial independence. American companies Visa and Mastercard currently dominate card payments across the eurozone, accounting for most cross-border transactions. European officials see the digital euro as a way to reduce reliance on foreign payment providers and strengthen the bloc’s monetary sovereignty.

The proposal also comes as private digital currencies gain ground globally. While the United States is moving to regulate privately issued stablecoins and China has already rolled out its digital yuan, Europe is pursuing a state-backed alternative under strict public oversight.

Commercial banks, however, have voiced strong concerns. They argue that a digital euro could draw deposits away from traditional banks by allowing consumers to hold money directly with the central bank. Banking groups also warn that granting the digital euro legal tender status would force merchants to accept it, potentially disadvantaging private payment services.

Supporters counter that this is precisely the point. They argue that public money must remain available in digital form, just as physical cash is today.

The debate has become especially intense in the European Parliament, where Spanish lawmaker Fernando Navarrete Rojas is overseeing the legislation. Navarrete has expressed skepticism about the project, questioning its urgency and arguing that private-sector solutions may be more efficient.

His efforts to limit the digital euro to offline use only, a move that would significantly reduce its scope, were ultimately dropped after opposition from other political groups. Socialists, liberals, Greens and left-wing lawmakers have broadly supported the European Commission’s proposal.

Despite the disagreements, negotiations are progressing. A committee vote is expected by the end of June, followed by a full parliamentary vote at a later date.

If approved, the legislation will move into final negotiations between the Parliament, the European Commission and EU member states. Those talks are expected to continue through 2026, setting the stage for a digital euro that could reshape how millions of Europeans pay for goods and services.

The Federal Reserve kept its benchmark interest rate unchanged on Wednesday, marking the third consecutive meeting without a move as policymakers weigh rising inflation and growing uncertainty linked to the conflict in the Middle East.

The decision leaves the federal funds rate in a target range of 3.50% to 3.75%. While widely expected, the outcome revealed significant divisions within the central bank’s policy-setting committee, underscoring the difficult balancing act facing officials.

In its post-meeting statement, the Fed said recent developments in the Middle East had added to uncertainty surrounding the US economic outlook. It noted that inflation remains above target, partly due to higher global energy prices following renewed tensions in the region.

Despite holding rates steady, the central bank signalled that cuts remain possible later this year if inflation eases and economic conditions weaken. Still, the decision was far from unanimous. Three policymakers opposed language suggesting future rate cuts, while one official, Stephen Miran, argued for an immediate reduction.

The dissent marked the highest level of disagreement within the Federal Open Market Committee since 1992, highlighting a widening debate over how best to respond to slowing growth and persistent price pressures.

Fed Chair Jerome Powell, who is expected to step down as chair in May, said the central bank must remain cautious as it navigates a complex economic environment. Inflation has risen to 3.3%, well above the Fed’s 2% target, while recent data show the labour market is losing momentum.

Although unemployment remains relatively low at 4.3%, hiring has slowed considerably in recent months. Policymakers are trying to prevent inflation from becoming entrenched while avoiding unnecessary damage to economic growth.

Powell also indicated that he intends to remain on the Fed’s Board of Governors after his term as chair ends, potentially until early 2028. He cited concerns about maintaining institutional stability amid what he described as mounting political pressure on the central bank.

His decision would temporarily prevent President Donald Trump from appointing another governor immediately, even as Trump’s nominee to succeed Powell as chair, Kevin Warsh, moves closer to confirmation.

Warsh has advocated broad changes to the Fed’s policymaking framework and has expressed support for lower interest rates. However, with inflation still elevated, analysts say any shift toward easier monetary policy may be gradual.

The Fed’s next moves will likely depend on how inflation, employment and energy markets evolve in the coming months. For now, policymakers appear determined to proceed carefully as geopolitical risks and domestic economic challenges continue to shape the outlook.