ECB Confirms Launch of DLT Transactions in 2026 Amid Digital Euro Privacy Discussions

The European Central Bank (ECB) has announced that blockchain-based transactions will start settling in central bank money in 2026. This news comes as political focus grows on the unresolved privacy issues concerning the proposed digital euro.

Key Takeaways

The ECB will enable blockchain transactions in central bank money by 2026 as work on the digital euro progresses.
The digital euro aims to prevent market fragmentation and support cross-border payments.
Privacy concerns are growing, with the ECB emphasizing offline payment options to promote privacy.
Political negotiations are ongoing to establish a legal framework for the digital euro, with a timeline for pilot transactions in mid-2027.
Public sentiment towards the digital euro remains cautious, with many preferring traditional payment methods.

ECB Confirms Launch of DLT Transactions in 2026 Amid Digital Euro Privacy Discussions

In a statement on Friday, Piero Cipollone, a member of the ECB executive board, confirmed that the bank is preparing to facilitate transactions using distributed ledger technology (DLT) within its current monetary framework next year. Furthermore, he emphasized that the ECB continues to work on the technical aspects of the digital euro, which would serve as a digital equivalent of cash throughout the eurozone.

This initiative represents a significant advancement towards incorporating blockchain technology into Europe’s financial system.

ECB Actively Develops the Digital Euro Framework

Under the proposed system, DLT platform transactions will settle directly in central bank money, eliminating the need for private intermediaries. The ECB has maintained that this approach is essential to prevent fragmentation in tokenized markets, ensuring that new digital asset ecosystems continue using a reliable public settlement asset.

Cipollone mentioned that the digital euro infrastructure will be designed to interact with other central bank digital currencies, enabling cross-border payments. To safeguard the banking sector’s role in credit creation and monetary transmission, the ECB plans to implement measures such as holding limits and the exclusion of interest payments, which would deter significant shifts in deposits from commercial banks.

Having completed a two-year preparation phase in October 2025, the ECB is now in the readiness stage, selecting potential system providers and testing settlement methods. However, officials underscored that the ECB cannot advance without an approved legal framework from EU lawmakers.

ECB President Christine Lagarde asserted this week that the design work from the central bank is complete, and the focus now lies with political bodies to take action. Should the legislation pass in 2026, pilot transactions using the digital euro could commence in mid-2027, with the ECB targeting a first issuance in 2029.

Rising Privacy Concerns Surrounding the Digital Euro

As the timeline for the digital euro becomes clearer, discussions around privacy have intensified. The ECB has reiterated that it opposes a programmable digital euro that would limit how users can utilize their funds. To address privacy needs, it has proposed an offline payment option, which would facilitate low-value transactions without central ledger records, thereby offering privacy protections similar to cash.

Offline balances stored locally for privacy

Funds for offline transactions will be managed locally on devices or smart cards, allowing peer-to-peer payments without third-party validation. However, these promises come amidst broader regulatory movements in the European Union. Recent EU proposals related to data retention and anti-money laundering (AML) have raised alarms among privacy advocates. Critics caution that impending AML regulations, which will prohibit crypto accounts that support transaction anonymization from 2027, could undermine the privacy guarantees touted for the digital euro.

Political discussions are currently in progress, with the Council of the EU having established its negotiating stance for the digital euro's legal framework on December 19. Talks are expected to proceed with the European Parliament, which aims to finalize its position by May 2026.

Though ECB officials have described inter-member state discussions as constructive, they also acknowledge that issues regarding privacy, data access, and democratic oversight remain contentious. Public interest in the digital euro is also uncertain. A recent ECB consumer survey indicated that many Europeans feel little necessity for a digital euro, preferring existing payment options such as cash and bank accounts.

While the ECB has assured that levels of adoption would not jeopardize financial stability, it recognizes that public trust and education will be crucial for successful implementation.