Online vs. Offline CBDCs — The Privacy Battle Dividing the EU

• The Council of the EU has adopted a digital euro negotiating position that favors online and offline functionality.
• However, privacy hawks in the European Parliament are pushing for an offline-only digital currency.
• As the two sides prepare for negotiations in 2026, privacy has emerged as the key battle line.

As the EU’s digital euro inches closer to realization, policymakers are split between two camps with competing visions for the central bank digital currency.

In one model, offline CBDCs behave like digital cash, with strong privacy built in by design.

However, another, more ambitious approach envisions the digital euro as a comprehensive online payment instrument that offers the same functionality as cards and digital wallets.

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The Two Digital Euros: Online Accounts vs. Offline Tokens

The distinction between online and offline versions of the CBDC emerged early on in discussions over the digital euro, with a string of EU policy documents exploring the pros and cons of each model since 2020.

An online digital euro would function like today’s electronic payments, with accounts tied to individual consumers and businesses, and transactions validated through infrastructure operated by banks and other regulated Eurosystem participants.

Meanwhile, offline CBDCs more closely resemble traditional cryptocurrencies, with tokens that move between wallets on a peer-to-peer basis, eliminating the need to update balances on a centralized ledger.

Privacy Hawks Favor Offline-Only CBDC

In the debate over online versus offline digital euros, privacy is a central political constraint.

The European Central Bank (ECB) has repeatedly framed privacy as “by design,” arguing that it wants the digital euro to meet very high privacy standards compared with existing electronic payment rails.

But that prospect holds much more weight with an offline CBDC, which promises a cash-like degree of anonymity, at least for small payments.

Alongside the European Commission, the ECB favors a hybrid system, with larger payments requiring online validation, but some offline functionality for low-value payments.

However, after the Commission outlined a proposal for online and offline functionality in 2023, privacy hawks in the European Parliament pushed back, arguing that online CBDCs could grant centralized authorities unprecedented visibility into consumers’ daily spending.

They argued that the proposal’s privacy guarantees for online CBDCs lacked legal grounding and would require users to simply trust that their payment data wouldn’t be accessed by centralized authorities.

That view is backed by the European Data Protection Board (EDPB) and the European Data Protection Supervisor (EDPS), which have warned that the systematic logging of online payments risks violating EU data-minimization principles.

Council vs. Parliament

Since 2023, Members of the European Parliament (MEPs) have increasingly rallied around an offline-first, or even offline-only, digital euro.

But on Dec. 19,  the EU Council representing Member States backed a negotiating position that more closely aligns with the European Commission’s 2023 proposal.

Now, the EU’s two decision-making branches are on a collision course.

With negotiations set to take place throughout 2026, the future of the digital euro project rests on whether or not the Council can convince enough MEPs to back online CBDCs.

Critics of online digital euro payments can be found across the political spectrum.

With diverse parliamentary alliances expected to push for strong privacy protections for any online functionality, the Council will likely need to offer legal guarantees that have been absent from the discussion so far.