Changes from report parliamentary committee draft to plenary report

Change 9

RemovedRecital 57: (57) European Digital Identity Wallets could facilitate digital transactions by enabling authentication, identification and the exchange of attributes including licenses and certificates. European Digital Identity Wallets should contribute to the effective universal access to and use of the online digital euro. Member States should issue European Digital Identity Wallets based on common standards and practices set out in the implementing legislation. The European Digital Identity Wallet should have strong and specific safeguards to ensure data protection and privacy and high-level security certification. Front-end solutions to be developed by the European Central Bank should therefore duly consider the technical specifications governing the European Digital Identity Wallets. This would enable the relevant interoperability with the European Digital Identity Wallets that would allow to capitalise on these benefits. Based on user choice, interoperability with the European Digital Identity Wallet should also allow to discharge customer due diligence under Regulation (EU) [please insert reference – proposal for a Regulation for Anti-Money Laundering Regulation – COM/2021/421 final). Furthermore, to achieve a coherent customer experience, intermediaries might choose to fully integrate their online digital euro front-end services into the specifications governing the European Digital Identity Wallets.

Added▌

RemovedRecital 58: (58) Users should be able, if they so wish, to onboard and authorise payments with the digital euro by using the European Digital Identity Wallets. Payment service providers should therefore be obliged to accept the European Digital Identity Wallets for the verification of both prospective and existing customers’ identities, in line with Regulation (EU) [please insert reference – proposal for a Regulation for Anti-Money Laundering Regulation – COM/2021/421 final). To facilitate the opening of online digital euro accounts across the Union, payment service providers should also be able to rely on qualified attestations provided by the European Digital Identity Wallets, including for the remote performance of customer due diligence. Payment service providers should also accept the use of European Digital Identity Wallets if the payer wishes to use the wallet for payment authorisation of online digital euro payment transactions.

Added(32) An unrestricted use of digital euro as a store of value could endanger financial stability in the euro area, and undermine the capacity of credit institutions to provide credit to the economy. Accordingly, it is necessary for the European Central Bank, with a view to safeguarding monetary sovereignty and to mitigating risks to the stability of the financial system, while respecting the principle of proportionality and the broader objectives of the digital euro, to define quantitative limits on the digital euro holdings of natural persons and to develop, where needed, other instruments to limit the use of the digital euro as a store of value, such as limits to conversion of other categories of funds to digital euro in a specified timeframe. Holding limits should be calibrated, in particular, with a view to safeguarding monetary sovereignty, supporting monetary policy, ensuring the usability and acceptance of the digital euro as a legal tender instrument, and contributing to mitigating risks of a significant outflow of retail deposits and structural disintermediation in the banking sector. Those limits should be in place before the first issuance of the digital euro across the euro area to ensure the use of the digital euro as a single currency. When deciding on the parameters to set the limits and use of such instruments ▌, the European Central Bank should, in particular, respect the principle of an open market economy with free competition, in accordance with Article 127(1) TFEU.

RemovedRecital 59: (59) To facilitate a harmonised user experience, the digital euro rules, standards and processes that the European Central Bank may adopt pursuant to its own competences, should ensure that any digital euro user is able to carry out digital euro payment transactions with any other digital euro users across the euro area regardless of the payment service providers involved and the front-end services used. To reduce the fragmentation of the European retail payments market, and to support competition, efficiency and innovation in that market, and the development of payment instruments across the Union in keeping with the objective of the Commission’s retail payment strategy, the digital euro should be, to the extent possible, compatible with private digital payment solutions, especially those underpinned by instant payments, building on functional and technical synergies. In particular, the European Central Bank should seek to ensure that the digital euro is compatible with private digital payment solutions at the point of interaction, e-commerce, and in person-to-person payments, where the fragmentation of the Union retail payments market is currently significant. The use of open standards, protocols, common rules and processes governing private digital means of payment and possibly shared infrastructures could support such compatibility. In order to achieve these objectives, and without conferring any enforceable rights upon market operators, the European Central Bank should s…

Added(32a) Prior to setting quantitative limits on digital euro holdings, the European Central Bank should, after consulting the European Systemic Risk Board, assess the impact of such limits not only at Union level, but also at Member State level, having regard to the different business models of Union deposit-taking institutions, to ensure that the introduction of the digital euro does not entail any financial instability. When carrying out that assessment, the European Central Bank should consider stress scenarios, including with regard to severe liquidity and tail-risk events, and analyse the granular data concerning the distribution of deposit structures within deposit-taking entities across the Union banking sector, including with regard to the weight of small-value deposits in bank funding and the specific deposit structure of financial institutions primarily relying on retail small-value deposits.

RemovedRecital 60: (60) To facilitate dispute resolution regarding online digital euro payment transactions as well as funding and defunding operations for the offline digital euro transactions, the European Central Bank should provide payment service providers and digital euro users with technical and functional support for dispute resolution, related at least to technical and fraud (pre) disputes. Technical disputes include inter alia situations where the transaction amount differs, where there are duplicates, or where there is no authorization or pre-validation. Fraud disputes include inter alia situations of identity theft, merchant identity fraud, counterfeit goods.

Added(32b) As a general rule, legal persons should not maintain any digital euro holdings. Nonetheless, legal persons, when acting as payees in digital euro payment transactions, should be allowed to temporarily accumulate digital euro holdings of incoming digital euro payments for a maximum period of 24 hours, to allow for consolidated defunding operations that combine multiple individual defunding operations (‘batch defunding’), similar to the emptying of cash registries. Additionally, allowing legal entities to temporarily maintain holdings of digital euro with no limits during severe disruptions of the network is appropriate to ensure that citizens are not deprived of a soverign payment solution in crisis situations. As soon as the network disruption comes to an end, such temporary holdings should be automatically defunded to the corresponding non-digital euro accounts.

RemovedRecital 60 a (new): (60a) To ensure the coherent application of the Rulebook governing the operation of the digital euro, and in view of the European Central Bank’s role as the operator of the online digital euro infrastructure and as designer and standard-setter for the offline digital euro device, disputes among payment service providers arising from the application of that Rulebook should be decided within a single dispute-settlement function performed by the European Central Bank on a contractual basis with payment services providers distributing the digital euro. This arrangement provides for a clear allocation of responsibilities, grounded in a causal nexus between the European Central Bank’s provision of the infrastructure and application of the Rulebook and any issues arising therefrom. To safeguard impartiality, the function should operate under internal rules and a governance framework ensuring operational separation and full independence from the European Central Bank’s payment-system oversight tasks. Decisions adopted in this context should bind participating providers through their contractual commitments, without prejudice to access to judicial remedies under Union and national law.

Added(33) Limits should not be used to substitute for early intervention or other supervisory measures. Neither should such limits be imposed to address situations of individual credit institutions which competent resolution authorities or other relevant authorities would normally deal with by using tools and powers at their disposal, including suspensions of payment, moratoria, measures available under Directive 2013/36/EU, Directive 2014/59/EU or Regulation (EU) No 806/2014, or other similar measures which are aimed at restoring the viability, resolving the institution concerned or otherwise remedying the situation of financial distress.

RemovedRecital 61: (61) To access and use the digital euro as part of digital euro payment services, digital euro users should be provided with front-end services. Those users should have the possibility to access and use digital euro payment services via the front-end services provided by the European Central Bank. In this respect, payment service providers should have capacity to provide digital euro users with the possibility to access and use digital euro payment services via the front-end services provided by the European Central Bank. Payment service providers should be able to allow digital euro users to access and use digital euro payment services through their own front-end solutions. Where digital euro users can choose between different front-end services, the decision to select a given front-end service should ultimately rest in the hands of those users and should not be imposed by payment service providers or the European Central Bank. The European Central Bank and the payment service providers shall implement appropriate technical and organisational measures including state-of-the-art security and privacy-preserving measures to ensure that the identity of individual digital euro users cannot be accessed by the ECB via its front-end solution.

Added(33a) There should be an overall ceiling to the quantitative limits on digital euro holdings of natural persons defined by the European Central Bank. For the purpose of establishing that celing, the Europen Central Bank should, following the publication of a technical report on the specific quantitative limits on digital euro holdings of natural persons and on any instruments developed to limit the use of the digital euro as a store of value, submit a recommendation to the European Parliament, the Council and the Commission on the figure for the overall ceiling. Within three months of receipt of that recommendation, the Commission should adopt a delegated act to set the overall ceiling to the quantitative limits on digital euro holdings of natural persons, which should be set at a level that avoids interference with the European Central Bank’s exclusive power to authorise the issuance of the digital euro. To avoid a scenario where the digital euro is issued without a quantiative limit on digital euro holdings for natural persons first being set, in the event that the Commission delegated act is not in force at the latest by six months from the notification of the delegated act to the European Parliament and the Council on the overall ceiling (for example as the result of an objection being expressed by the European Parliament or the Council), the European Central Bank should be entitled to move forward with the definition of the the quantitative limits on digital euro holdings for natural persons in line with its technical report. However, as soon as the delegated act enters into force, the European Central Bank should adjust the quantitive limits set in accordance with that ceiling.

RemovedRecital 61 a (new): (61a) Payment service providers distributing the digital euro should ensure that digital euro payment services when providing front-end services to access and use the digital euro comply with the technical and security standards set up or certified by the European Central Bank. To that end, the European Central Bank should develop the technical, operational and security standards, including the certification process where applicable, to the offline digital euro devices and the digital euro payment accounts to ensure the resilient, safe and smooth execution of payments.

Added(33b) The overall ceiling for quantitative limits on the digital euro holdings of natural persons should be reviewed at least every two years. To that end, at least six months before the end of every two-year period after the entry into force of the delegated act that sets the overall ceiling to the quantitative limits on digital euro holdings of natural persons, the European Central Bank should publish a new recommendation for the updated figure of the overall ceiling and submit it to the European Parliament, to the Council and to the Commission. In line with the recommendation from the European Central Bank, the Commission is empowered to adopt a delegated act to revise the overall ceiling.

RemovedRecital 62: (62) The ECB and the payment service providers should implement appropriate technical and organisational measures including state-of-the-art security and privacy-preserving measures to ensure that the identity of individual digital euro users cannot be accessed by the ECB via its front-end solution.

Added▌

RemovedRecital 63: (63) To enable a smooth user experience, payment service providers that provide digital euro users with front-end services to access and use the digital euro should take care that digital euro users can quickly and easily access and use the digital euro. In particular, online digital euro payment accounts and offline digital euro devices should be clearly labelled by the use of the official digital euro logo. Online digital euro payment accounts should be accessed via one of the main pages of the Internet website or an application, or any other front-end services, on an equal footing with non-digital euro payment accounts.

Added(36) The digital euro should allow for a smooth payment experience. Any limits or instruments that the European Central Bank might employ to ▌ digital euro’s store of value function should take this objective into account. Automated mechanisms that link a digital euro payment account with a non-digital euro payment account should allow for an uninhibited payment functionality of the digital euro, by ensuring that transactions are successfully executed in the presence of individual digital euro holding limits that may become binding on the payer’s or payee’s side. In particular, digital euro users should be able to initiate a digital euro payment transaction even though the amount of their digital euro holdings is inferior to the amount of the transaction, by automatically mobilising funds from a non-digital euro payment account to complement the transaction amount (‘reverse waterfall functionality’). Conversely, digital euro users should be able to receive digital euro payment transactions even though the amount of the transaction exceeds the limit set on their digital euro holdings, by automatically transferring funds in excess of the limit to a non-digital euro payment account (‘waterfall functionality’). Such payment functionalities should be expressly authorized by digital euro users. Where digital euro payment account held by one payment service provider is linked to a non-digital euro payment account held by another payment service provider, the waterfall functionality should be enabled. In contrast, the reverse waterfall functionality should only be available where two payment service providers have entered into an arrangement defining the conditions for enabling the funding and defunding functionalities provided by the payment service provider holding the non-digital euro payment account. Any other funding and defunding functionality apart fom waterfall and reverse waterfall should only be available when the operations take place between the same payment service provider, unless payment service providers enter into specific voluntary contractual arrangements for such purposes.

RemovedRecital 64: (64) To provide for instantaneous settlement, both online and offline digital euro transactions, including in the context of funding and defunding, should be settled instantaneously, in a few seconds only, in normal circumstances. The settlement of online digital euro payment transactions should be performed in the digital euro settlement infrastructure adopted by the Eurosystem. Online digital euro payment transactions should be settled in a matter of seconds as specified under the functional and technical requirements adopted by the European Central Bank. Final settlement of online digital euro payment transactions should be achieved at the moment of recording the digital euros concerned of the payer and the payee in the digital euro settlement infrastructure approved by the European Central Bank, irrespective of whether digital euros are recorded as holding balances or units of value, or of the technology used. The online digital euro settlement infrastructure should seek to ensure adaptation to new technologies, including distributed ledger technology.

Added(37) While instruments employed by the European Central Bank to limit an excessive use of the digital euro as a store of value aim at safeguarding financial stability and financial intermediation, they may nonetheless impact on and interact with the European Central Bank’s monetary policy stance. Such instruments would therefore need to be applied uniformly across the euro area in order to ensure the use of the digital euro as a single currency and the singleness of the monetary policy. Furthermore, a uniform application would be necessary to ensure a level playing field for payment service providers in the European single market or avoid an overly complex enforcement of any instrument through payment service providers on the basis of digital euro users’ residency. ▌The digital euro should not bear interest and, as such, the European Central Bank and the national central banks, as issuers of the digital euro, should neither pay nor charge interest to a digital euro user for the mere holding of digital euros.

RemovedRecital 65: (65) The settlement of offline digital euro payment transactions should be performed without the need for a digital euro settlement infrastructure. Offline digital euro payment transactions should be settled in a matter of seconds as specified under the functional and technical requirements adopted by the European Central Bank. Final settlement should occur at the moment when the funds in the payer’s offline digital euro device are directly transferred to the payee’s offline digital euro device without any intermediation of any payment service provider or the digital euro settlement infrastructure.

Added(38) Limits to the use of the digital euro for digital euro users residing or established outside the euro area should not be more favourable than for digital euro users residing or established in the euro area, also to cater for monetary sovereignty and financial stability concerns both within and outside the euro area.

Change 10

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Change 11

RemovedRecital 68: (68) The prevention of fraud by payment service providers is essential for the protection of citizens making use of the digital euro, the integrity of the personal data processed in digital euro payments, and to ensure the smooth and efficient functioning of the digital euro. Fraud prevention plays an essential role in maintaining trust in the single currency. For this purpose, the European Central Bank should establish a general fraud detection and prevention mechanism to support fraud management activities performed by payment service providers on online digital euro payment transactions. A general fraud detection and prevention mechanism delivers a range of essential functions to detect fraud patterns that a single payment service provider could not detect on its own. Often one payment service provider does not have the full picture about all elements that could lead to timely fraud detection. However, it can be made more effective with information on potentially fraudulent activity stemming from other payment service providers. This general fraud detection function exists in comparable payment schemes and is necessary to achieve demonstrably low fraud rates in order to keep the digital euro secure for both consumers and merchants. The transfer of information between PSPs and the fraud detection and prevention mechanism should be subject to state-of-the-art technical, safety and privacy-preserving measures. Individual digital euro users should not be identified by the cent…

Added(39a) The quantitive limits on digital euro holdings apply both to the online and offline digital euro payment functionality. As a digital euro user, a natural person could set its limits to offline digital euro holding at any amount between zero and the specific holding limit set to that functionality. Accordingly, for a natural person using both online and offline digital euro payment functionalities, the limit that applies to digital euro holdings should equal the value resulting from the specific quantitative overall holding limit of digital euro holdings defined by the European Central Bank, deducted for the limit for offline digital euro holdings determined by that user.

RemovedRecital 69: (69) To process digital euro payments online or offline, it is essential that front end service providers for the digital euro and issuers of European Digital Identity Wallets obtain access to near field communication technology (NFC) on mobile devices. These components include, in particular but not exclusively, NFC antennas and the so-called secure elements of mobile devices (e.g.: Universal Integrated Circuit Card (UICC), embedded SE (eSE), and microSD etc). It is therefore necessary to ensure that whenever needed to provide digital euro services, original equipment manufacturers of mobile devices or providers of electronic communication services would not refuse access to NFC antennas and secure elements. Central bank money with legal tender should be widely accessible. To ensure this also in the digital economy, providers of front-end services for the digital euro and operators of European Digital Identity Wallets shall be entitled to store software on relevant mobile devices’ hardware in order to make transactions with digital euro technically possible both online and offline. For this purpose, original equipment manufacturers of mobile devices and providers of electronic communication services should be obliged to provide access on fair, reasonable and non-discriminatory terms to all hardware and software components when needed for online and offline digital euro transactions. In all instances, such operators would be obliged to provide adequate capacity on relevant ha…

Added(40) To ensure wide access to and use of the digital euro, consistent with its status of legal tender, and to support its role as monetary anchor in the euro area, natural persons residing in the euro area, natural persons who opened a digital euro payment account at the time they resided in the euro area, but no longer reside there, as well as visitors to the euro area, and natural persons acting as self-employed in a commercial activity in their capacity as payer, should not be charged for basic digital euro payment services. That means that such digital euro users should not bear any direct fees for their basic access to and basic use of the digital euro, including not being charged transaction fees or any other fees that are directly associated with the provision of services related to the basic use of the digital euro.▌ Where the digital euro user asks to receive only basic digital euro payment services with a payment service provider, those services should not be charged, including for waterfall ▌where the digital euro user also has a non-digital euro payment account with another payment service provider. ▌

RemovedRecital 70: (70) The rights to privacy and personal data protection are fundamental rights enshrined in Article 7 and 8 of the Charter of Fundamental Rights of the European Union. As stressed by the European Data Protection Board34, a high standard of privacy and data protection is crucial to ensure the trust of Europeans in the future digital euro. This is also in line with the G7 Public Policy Principles for Retail Central Bank Digital Currencies. The processing of personal data for compliance and in the context of this Regulation would be carried out in accordance with Regulation (EU) 2016/67935 and Regulation (EU) 2018/172536, as well as, where applicable, Directive 2002/58/EC37. / 35 Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation) (OJ L 119, 4.5.2016, p. 1–88). / 36 Regulation (EU) 2018/1725 of the European Parliament and of the Council of 23 October 2018 on the protection of natural persons with regard to the processing of personal data by the Union institutions, bodies, offices and agencies and on the free movement of such data, and repealing Regulation (EC) No 45/2001 and Decision No 1247/2002/EC (OJ L 295, 21.11.2018, p. 39–98). / 37 Directive 2002/58/EC of the European Parliament and of the Council of 12 July 2002 concerning the processing of person…

Added(40a) Payment service providers should be able to charge digital euro users for additional digital euro payment services beyond the basic digital euro payment services. However, payment service providers should not impose commercial practices which have the purpose or effect of circumventing the right of digital euro users to have basic digital euro payment services provided free of charge. Such commercial practices include, among others, account maintenance fees, inactivity fees, minimum balance requirements, or similar charges on digital euro accounts for basic digital euro payment services. For the same reason, payment service providers should not bundle basic digital euro payment services with additional services in a manner that makes it impossible or unreasonably difficult for digital euro users to access basic digital euro payment services without charge. Digital euro users should not be required to have or open a non-digital euro payment account or to accept other non-digital euro products and should not be discriminated against in any way by their payment service provider for choosing to use only basic digital euro payment services, to the detriment of any other additional services provided by the same payment service provider. Where a digital euro user agrees to a package of services comprising both non-digital euro services and basic digital euro payment services, the payment service provider should provide clear information to the user about the charge applicable to the services for the non-digital euro services only, to ensure that all basic digital euro payment services, including the opening, holding and management of a digital euro payment account, remain as a free addition to that package. Any fees for additional services provided beyond the basic digital euro payment services should be clearly disclosed in advance, individually negotiated and separately itemised from those basic digital euro payment services and be set contractually.

Change 12

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Change 13

RemovedRecital 73: (73) Payment service providers should be able to process personal data in so far as it is necessary to fulfil tasks that are essential to the proper functioning of the digital euro. In line with Article 6(1)(c) of Regulation (EU) 2016/679, processing activities should be considered lawful as regards the digital euro if and to the extent that they are necessary for compliance with a legal obligation to which the controller is subject pursuant to this Regulation. In the framework of this regulation, the processing of personal data for the purposes of the enforcement of holding limits, the initiation of the funding and de-funding of a user’s holdings, and the management of offline digital euro devices for offline digital euro payments are tasks in the public interest that are essential for the protection of citizens making use of the digital euro as well as for the stability and integrity of the Union's financial system. Payment service providers will be the controller of personal data as regards these tasks. In addition, payment service providers may process personal data to comply with existing tasks in the public interest or for compliance with a legal obligation established in Union law that apply to the digital euro. These tasks apply to the provision of payment services and the prevention and detection of fraud in accordance with Directive (EU) 2015/2366, combatting money laundering and terrorist financing in accordance with Directive (EU) 2015/849, the fulfilment of oblig…

Added(42) As the digital euro is a form of the single currency having legal tender status, digital euro payment transactions should not be subject to excessive fees by payment service providers. In particular, granting the digital euro legal tender status, with the corollary of mandatory acceptance, means that merchants would have no choice but to accept digital euro payment transactions. Furthermore, any charge or fee per transaction or period erodes, directly or indirectly, the face value of payments received, which is an essential component of the legal tender status. It is therefore essential that a fee or a charge, as a restriction of the face value of the digital euro, be objectively justified and proportionate to the objective of ensuring an effective use of the digital euro as a legal tender means of payment. For those reasons, any merchant service charges and inter-payment service provider fees in relation to digital euro payment transactions are subject to specific euro-area uniform caps.

RemovedRecital 75: (75) Offline digital euro payment transactions are payments that occur either in close physical proximity (“face-to-face”) or at a distance through a digital communication link if connectivity on both devices were to be available. Offline digital euro holdings are digitally stored in the device and there is no need for accounts or settlement infrastructures to perform a transaction. These are characteristics similar to cash and should be treated in a similar way in terms of privacy. Payment service providers should therefore not process personal data related to offline digital euro payment transactions, but only personal data related to the funding or defunding of the offline digital euro device. This includes the identifier of the offline digital euro device which payment service providers attribute to a digital euro user that holds offline digital euro. That level of privacy would be comparable to withdrawals of banknotes at automatic teller machines when payment service providers process personal data related to a user’s identity and data pertaining to how funding and defunding transactions have been carried out. That means that no transaction data monitoring should occur for offline digital euro payment transactions.

Added(42a) A transparent and equitable level playing field between payment service providers requires that the total fees charged for digital euro payment transactions should be aggregated into a single merchant service charge, thus avoiding any hidden or duplicative costs for merchants. That merchant service charge should represent the totality of costs applied by payment service providers for acquiring services and should be expressed as a percentage of the total value of transactions processed over a given period, irrespective of the underlying pricing model. The inter-payment service provider fee should provide sufficient compensation for the distribution costs of the distributing service providers. Offline digital euro transactions should not be subject to any inter-payment service fee or any merchant service charge, given that the settlement of those transactions takes place device-to-device without the intermediation of any payment service provider. Inter-payment service fees should also not apply to funding and defunding operations with payment service providers belonging to the same economic group.

RemovedRecital 76: (76) The European Central Bank and national central banks may process personal data in so far as it is necessary to fulfil tasks that are essential to the proper functioning of the digital euro. In the framework of this regulation, the processing of personal data for the purposes of the settlement of digital euro payment transactions and the management of the security and integrity of the digital euro infrastructure are tasks in the public interest that are essential for the protection of citizens making use of the digital euro as well as for the stability and integrity of the Union's financial system. The task of maintaining the security and integrity of digital euro infrastructure includes activities related to ensuring the stability and operational resilience of the digital euro. The European Central Bank and national central banks would be the controller of personal data as regards these tasks. The European Central Bank and national central banks would process personal data for these tasks using state-of-the-art security and privacy-preserving measures, such as pseudonymisation or encryption, to ensure that data cannot be used to directly or indirectly identify a specific digital euro user or link them to specific transactions.

Added(42b) In order to ensure the effective use of the digital euro as legal tender, to prevent unjustified or disproportionate charges to merchants, and to provide adequate compensation for payment service providers, this Regulation should establish rules on fees and charges that duly take account of the fact that the use of the digital euro will develop over time and that it may only reach a sufficiently stable situation once a significant period of time has elapsed from its first issuance.

RemovedRecital 77: (77) For the purpose of enforcing the limits and ensuring the exceptional switching of digital euro payment accounts in emergency situations upon the request of the digital euro user, a single access point of digital euro user identifiers and the related digital euro holding limits is necessary to ensure the efficient functioning of the digital euro across the entire euro area, as online digital euro users may hold digital euro payment accounts in different Member States. When establishing the single access point, the European Central Bank and national central banks should ensure that the processing of personal data is minimised to what is strictly necessary and that data protection by design and by default is embedded. The European Central Bank and national central banks should consider, where appropriate and to minimise the risk of data breaches, the use of decentralised data storage.

Added(42c) During the initial phase after the first issuance of the digital euro, the absence of reliable cost data and the lack of stabilised unit costs mean that it will not be possible to calculate the euro-area uniform caps on the basis of actual costs incurred for the provision of digital euro payment services. Consequently, the euro-area uniform caps applicable to both inter-payment service provider fees and merchant service charges during at least the first phase of application of this Regulation should be based on relevant data concerning comparable digital means of payment, comprising both international and domestic consumer debit card schemes that can be used by consumers at points of sale and in e-commerce. The Commission, with the technical assistance of the European Central Bank, should adopt the necessary implementing acts to determine, publish and periodically review the euro-area uniform caps, following a methodology that is based on the weighted average fee and charge levels based on volume of the inter-payment service provider fee and the merchant service charge applied to the comparable digital means of payment during the preceding 12-month period, relative to the aggregate value of payment transactions in that period.

RemovedRecital 80: (80) For online digital euro payment the AML/CFT risks are similar to comparable digital means of payment. It should therefore be laid down that an online digital euro payment transaction is to be subject to Directive (EU) 2015/849 of the European Parliament and of the Council, and Regulation (EU) 2015/847 of the European Parliament and of the Council39.

Added(42d) The calculation of the euro-area uniform caps, based on the weighted average fee and charge levels, should be subject to an adjustment factor bearing in mind that payment service providers will have to make investments associated with connecting to the digital euro payment infrastructure, that the public nature of the digital euro payment infrastructure absorbs any scheme and processing fee, and that the cost reduction should be assigned equally among payment service providers and merchants. The adjustment factor aims to provide an additional incentive for merchants to use the digital euro, in the sense that it might be helpful in leaving them in a situation where they can positively benefit from the compensation model applied to the digital euro, in comparison to card schemes.

RemovedRecital 80 a (new): (80a) While offline digital euro payment transactions have similarities with transactions in cash and should be treated in a similar way in terms of privacy, specific holding and transaction limits for offline digital euro payment transactions are essential to mitigate their specific AML/CFT risk profile.

Added(42e) As a final feature of the calculation of the euro-area uniform caps, it is important to guarantee a ‘no worse-off principle’ for all merchants to make sure that, irrespective of the value of the euro-area uniform cap, no merchant is charged a higher merchant service charge by a payment service provider for the provision of a digital euro payment service than it would be charged by that same payment service provider in respect of any comparable digital means of payment. The Commission, with the technical assistance of the European Central Bank, should collect all of the information on fees and charges necessary to implement the ‘no-worse off principle’ and peiodically publish the aggregated amounts of the relevant data. Additionally, payment service providers should disclose to their clients in a standardised format that is clear, simple and easy to understand, and that facilitates comparison of information about the fees charged for the provision of acquiring services with comparable digital means of payment for that specific merchant. The application of the ‘no worse-off principle’ takes account of concrete national specificities, including national system wide exceptions in the determination of the fees thereby ensuring that the digital euro will not make any person pay more than what that person is currently charged for comparable digital means of payment. Such national specificities may include arrangements establishing specific treatment of small value payments. The ‘no worse-off’ principle should ensure that merchants benefiting from such arrangements are not placed in a worse position than under the comparable means of payment to which those agreements apply.

RemovedRecital 80 b (new): (80b) The offline digital euro’s feature enabling payments with privacy levels comparable to cash also without physical proximity when connectivity is available on both ends, requires a bespoke AML regime for these offline transactions. That regime should follow a risk based approach aligned with recommendations and standards from competent international bodies in anti money laundering and counter terrorist financing, such as the Financial Action Task Force. The assessment should be proportionate to the offline digital euro’s legal tender status. Calibrating the new AML regime to that status is essential so that its use as a means of payment is not unduly restricted. A workable framework can be found in FATF Recommendation 16, point 8, which provides for a simplified AML framework that departs from the traditional “travel rule” by establishing a de minimis threshold. This approach is already reflected in Union law in Article 19(7) of Regulation (EU) 2024/1624 of the European Parliament and of the Council1a, which allows a full or partial exemption from requirements for certain products, regardless of the distance between payer and payee, subject to a maximum amount. The Commission should develop this bespoke AML/CFT regime in consultation with AMLA. / 1a Regulation (EU) 2024/1624 of the European Parliament and of the Council of 31 May 2024 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing (OJ L, 2024/1624, 19.6.20…

Added(42f) Without prejudice to the euro-area uniform caps fee system, by no later than five years after the first issuance of the digital euro, the Commission, after consulting the European Central Bank, should carry out a review and evaluate the conditions for the application of a cost-based compensation model. That review should be able to be carried out beforehand if the Commission considers that relevant, sufficient and reliable data for digital euro transactions are available in an accurate, harmonised and verifiable manner, and that the average unit cots and volume of total digital euro transactions have stabilised after consumers’ adoption period. If the Commission concludes that the fees and charges that could result from a cost-based compensation model, including a reasonable margin of profit, are lower than those resulting from a model based on the euro-area uniform caps fee system, it should adopt an implementing act to establish uniform conditions for a new cost-based compensation model, which will replace the euro-area uniform caps fee system. If the Commission considers that those conditions are not met, it should repeat the review on a biannual basis, for a maximum of five years.

RemovedRecital 82: deleted

Added(42g) The cost-based compensation model to be implemented by the Commission should guarantee that merchant service charges or inter-payment service provider fees is determined by the relevant costs incurred by a group of the most efficient payment service providers for the provision of digital euro payment services, including a reasonable margin of profit, calculated on the basis of the profit margin applied by those payment service providers charging the lowest margins distributed in the euro area in a given year. Additionally, the cost-based compensation model should be applied in an uniform and non-discriminatory manner across the Union, ensuring a homogeneous regime for all payment service providers and merchants, and should provide for proportionate treatment for small value transactions initiated in microenterprises, including the possibility for a flat fee or per transaction fee, to avoid disproportionate cost burdens.

RemovedRecital 82 a (new): (82a) In order to ensure a consistent application of the legal tender requirements and keep pace with technological developments, the power to adopt acts in accordance with Article 290 TFEU should be delegated to the Commission to supplement this Regulation by adopting delegated acts in respect of additional exceptions to mandatory acceptance and the types of personal data processed by payment services providers, the European Central Bank and the national central bank and providers of support services. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level. The Commission, when preparing and drawing up delegated acts, should ensure a simultaneous, timely and appropriate transmission of relevant documents to the European Parliament and to the Council.

Added(42h) The Commission, with the technical assistance of the European Central Bank, should reassess the cost-based compensation model at least every five years after its implementation and update the model accordingly. The reasessment of the model should only cease in the event that the Commission concludes at a certain point that the relevant costs are zero or near to zero.

RemovedRecital 85: (85) The European Data Protection Supervisor and the European Data Protection Board were consulted in accordance with Article 42 of Regulation (EU) 2018/1725 of the European Parliament and of the Council41 and delivered a joint opinion on 17 of October 2023.

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RemovedArticle 1 – paragraph 1: This Regulation establishes the digital euro and lays down rules concerning, in particular, its issuance, legal tender status, distribution, use and essential technical features.

Added(46) The distribution of the digital euro by natural or legal persons residing or established outside the euro area would contribute to foster the international use of the euro. This would also bring benefits to the euro area and other economies by facilitating cross-border payments for the purpose of trade or remittances, in line with the G20 agenda.

RemovedArticle 2 – paragraph 1 – point 1: 1. ‘digital euro’ means the digital form of the single currency, both offline and online, available to natural and legal persons;

Added(47) An excessive distribution of the digital euro outside the euro area could have an unwanted impact on the size and composition of the consolidated balance sheet of the European Central Bank and national central banks. Impacts on monetary sovereignty and financial stability of non-euro area countries may also differ depending on the use of the digital euro outside the euro area. Those impacts could be harmful in case the digital euro replaces the local currency in a high number of domestic transactions. In particular, a situation in which the digital euro becomes dominant in a Member State whose currency is not the euro, thus de facto replacing the national currency, could interfere with the euro area adoption criteria and process set out in Article 140 TFEU. To avoid undesirable effects and prevent monetary sovereignty and financial stability risks, both within and outside the euro area, it is necessary to provide for the possibility for the Union to conclude agreements with third countries, and for the European Central Bank to conclude arrangements with the national central banks of Member States whose currency is not the euro and with the national central banks of third countries, to specify the conditions for the regular provision of digital euro payment services to digital euro users residing or established outside the euro area. Such agreements and arrangements should not cover visitors to the euro area, to whom payment service providers established in the European Economic Area, in line with the Agreement on the European Economic Area, may directly provide digital euro payment services.

RemovedArticle 2 – paragraph 1 – point 1 a (new): 1a. “offline digital euro” means a non account-based, digital representation of cash issued by the European Central Bank that is digitally stored and accessible through an offline digital euro device, and that can be digitally and securely transferred to another offline digital euro device without the need for a centralised digital euro settlement infrastructure for final settlement of the transactions, and that can operate even if one or both offline digital euro devices temporarily or permanently have no internet connectivity;

Added(48) The provision of digital euro payment services to digital euro users residing or established in a Member State whose currency is not the euro should be subject to a prior agreement between the European Central Bank and the national central bank of the Member State whose currency is not the euro, following a request from the Member State whose currency is not the euro. In line with the Agreement on the European Economic Area, digital euro users residing or established in non-euro area Member States may be provided digital euro payment services by payment service providers established in the European Economic Area.

RemovedArticle 2 – paragraph 1 – point 1 b (new): 1b. ‘online digital euro’ means an account-based online payment system issued by the European Central Bank that requires a digital euro settlement infrastructure;

Added(49) The provision of digital euro payment services to digital euro users residing or established in third countries, with the exclusion of third countries or territories that are under a monetary agreement with the Union, should be subject to a prior agreement between the Union and such third country. This should also apply in the case of States that are a party to the Agreement on the European Economic Area or the Convention establishing the European Free Trade Association. Such agreement should be complemented by an arrangement between the European Central Bank and the national central bank of the third country. Intermediaries established in the same country of residence or establishment than digital euro users and payment service providers established in the European Economic Area may provide digital euro payment services to digital euro users residing or established in third countries. Intermediaries providing digital euro payment services in third countries should be subject to adequate regulatory and supervisory requirements, with the objectives to ensure that the digital euro, which is a central bank money, is safely and adequately distributed, and is not misused. Regulatory and supervisory requirements should be determined as part of the conclusion of the international agreement, based on proportionate, objective and uniform criteria. Agreements and arrangements with high-risk third countries identified pursuant to Regulation [please insert reference – proposal for a Regulation for Anti-Money Laundering Regulation – COM/2021/421 final) should be restricted, suspended, or terminated.

RemovedArticle 2 – paragraph 1 – point 1 c (new): 1c. "Pan-European sovereign retail payment solution" means a privately-operated European digital payment solution, which: / (a) is accessible within the Union; / (b) is operated by an undertaking established in the Union which is not under the controlling influence of third parties established outside the Union, and essential infrastructure of which is located within the EEA in accordance with Regulation (EU) 2019/452 of the European Parliament and of the Council1a; / (c) operates recognised Union-wide standards in accordance with Regulation (EU) No 260/2012 of the European Parliament and of the Council2a or is technically integrated into SEPA-compliant systems as regards credit transfers, instant payment at the point of interaction or established Union-based debit card schemes; / (d) offers payment functionalities for natural persons; / (e) enables payments in all euro area Member States, directly or through interoperability with other European sovereign retail payment solutions; / (f) is subject to the oversight and supervision of the Union-level requirements by the Eurosystem in collaboration, when appropriate, with national competent authorities; / 1a Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union (OJ L 79I, 21.3.2019, p. 1, ELI: http://data.europa.eu/eli/reg/2019/452/oj) / 2a Regulation (EU) No 260/2012 of the European Parliament and of the Cou…

Added(50) The provision of digital euro payment services to digital euro users residing or established in third countries or territories, under a monetary agreement with the Union, should be governed by monetary agreements. Intermediaries established in the same country of residence or establishment than digital euro users and payment service providers established in the European Economic Area may provide digital euro payment services to digital euro users residing or established in third countries or territories, under a monetary agreement with the Union.