Core Focus: The governance framework for the digital euro, the compensation model for intermediaries, and the fee structure balancing fairness for merchants and PSPs.

In-Depth Notes:
The digital euro’s governance framework establishes how it will be operated, how the costs will be shared, and how the incentives for private sector intermediaries will be structured. The fee framework is among the most contentious political issues in the negotiations .

Governance:
The ECB designs and issues the digital euro, while the Council and the European Parliament define its legal framework through the ordinary legislative procedure . Commercial banks and payment institutions distribute the currency, manage customer interfaces, and receive regulated fee income from digital euro services .

Free Basic Services:
Payment service providers may not charge consumers for certain mandatory services, such as opening and closing accounts, carrying out digital euro payment transactions, or funding and defunding their digital euro accounts or wallets . Basic services such as opening an account, holding and managing funds, and receiving at least one payment instrument would be free .

Compensation for PSPs:
The compensation model for PSPs is a key political issue . Under the Commission’s original proposal, fees would have been capped at the lower of the PSP’s costs (plus reasonable profit) and fees for comparable digital means of payment . Both the Parliament and Council agree on the principle of a transitional model (capped fees based on comparable private means of payment) shifting to a cost-based system. The Parliament proposes allowing the transitional model to run indefinitely if it provides lower costs for merchants and greater efficiency, while the Council suggests a firm transition . The Parliament also proposes that offline payments would be entirely fee-free .

The Democratic Dimension:
The digital euro’s governance framework is fundamentally democratic. The ECB would not have the power to create social credit systems, behavior-based incentives, purchase restrictions, or money expiry—such applications would contravene the ECB’s mandate and fundamental rights . The ECB is a specialised, independent institution that does not have the democratic legitimacy to embed such political choices in a monetary instrument . The final say on all policy choices rests with the elected co-legislators.

The Eurosystem’s Core Roles:
The Eurosystem retains core control over the digital euro’s money supply and compliance with legal requirements, while PSPs manage client data accuracy and front-end operations . The European Data Protection Supervisor would oversee privacy compliance, and AI-assisted fraud detection would require oversight to prevent bias