(Bloomberg) -- The EU’s executive arm will unveil plans for a digital euro that would require the European Central Bank to set limits on its use without proposing specific thresholds on transactions or holdings.

The ECB must decide on the instruments required to ensure financial stability, according to a draft European Commission proposal on setting up the digital euro seen by Bloomberg. These mustn’t prevent digital-euro transactions that don’t put stability at risk and they should be applied equally across the euro area.

“With a view to ensuring the stability of the financial system, the availability of credit and the transmission of monetary policy, the use of the digital euro as a store of value may be subject to limits,” the draft proposal said.

The project will be discussed by euro-area finance ministers meeting in Luxembourg on Thursday as governments in the currency bloc have been closely involved in assessing whether launching a digital currency is relevant and what features are needed to ensure stability.

The draft text, still subject to changes ahead of its scheduled presentation on June 28, said the digital euro will have legal tender status and that its acceptance will be mandatory. Exceptions would apply to microenterprises and nonprofit organizations that don’t accept digital payments.

Rising Demand

Accepting the digital currency won’t be mandatory if the reasons are legitimate and based on temporary grounds, for personal or household activities or if other means of payments have been previously agreed, according to the draft proposal.

Digital euros would be convertible into euro banknotes and coins at par, and any surcharges on debt repayments would be prohibited. The ECB and the commission have insisted that the digital currency will coexist with cash.

The ECB believes a digital euro would respond to the increasing demand for electronic payments and strengthen the monetary sovereignty of the euro area. The central bank’s Governing Council will decide whether to move to the realization phase in the fall. Development could take around three years.

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