Digital Euro Phase II Pilot Expands to Nine Banks as Frankfurt Conference Charts Path to MVP

The Digital Euro Conference 2026, held in Frankfurt on March 26, confirmed a significant expansion of the digital euro pilot program, with the number of participating banks set to increase from seven to nine in Phase II. The announcement marks a new chapter in the Eurosystem's multi-year effort to bring a sovereign digital currency to the euro area, with an MVP (minimum viable product) now targeted before the European Central Bank makes its definitive circulation decision [1].

Phase II: A Broader Mandate for Testing

Phase II of the digital euro pilot goes well beyond the foundational groundwork laid in Phase I. Where the earlier phase concentrated on system build-out and core infrastructure validation, the expanded program introduces six distinct test categories that probe the full commercial and technical range of a retail central bank digital currency (CBDC) [1].

The six categories reflect both consumer-facing functionality and the more sophisticated programmability that central banks and payment service providers are increasingly prioritizing. Person-to-person transfers and biometric authentication address everyday retail payment needs, while deposit token sweeps test the automated movement of funds between commercial bank liabilities and the CBDC layer, a mechanism critical to preserving bank deposit structures under a digital euro regime [1].

Two categories stand out for their forward-looking implications. The EV charging tokenization workstream tests machine-to-machine payments within electric vehicle infrastructure, where a vehicle or charging station autonomously settles payment without human intervention. This model of programmable infrastructure payments is seen as foundational to the broader Internet of Things economy. Separately, the AI agent payment experiments examine how autonomous software agents might originate and execute digital euro transactions on behalf of users, raising questions about authorization frameworks and liability that the rulebook will need to address [1].

Parliamentary Endorsement and Legislative Momentum

The conference convened against the backdrop of a decisive political development. On February 10, 2025, the European Parliament voted to endorse both the online and offline functionality of the digital euro, aligning itself with the European Council's negotiating position and clearing a significant political hurdle in the CBDC's legislative journey [1][2].

The vote on one key amendment passed with 420 in favor, 158 against, and 64 abstentions, while a second amendment on monetary sovereignty carried by 438 in favor, 158 against, and 44 abstentions [2].

"CBDC is essential for EU monetary sovereignty, reducing retail payments fragmentation, and supporting single market integrity and resilience."

The Parliament's position represented a departure from earlier proposals that had sought to limit the digital euro to offline-only use, a restriction that would have substantially curtailed its utility for e-commerce and cross-border transactions. By backing an online-capable design, legislators aligned with the ECB's own preference and accelerated the path toward a unified technical framework [2].

The ECB has indicated it aims to be ready for a potential first issuance of the digital euro during 2029, contingent on the EU Regulation on the establishment of the digital euro being adopted in the course of 2026 [1]. A pilot exercise with initial transactions could begin as early as mid-2027, ahead of any full issuance decision.

Rulebook Development Group: Filling Critical Gaps

Parallel to the pilot expansion, the ECB issued a call for experts to join two workstreams under the Digital Euro Rulebook Development Group (RDG), the body responsible for setting common rules, standards, and procedures for using the digital euro across the euro area [1].

Workstream G5 focuses on implementation specifications for ATMs and payment terminals, including communication technologies, integration of offline digital euro functionality, and alignment with existing industry standards. The offline dimension is particularly significant: it allows the digital euro to function like physical cash in environments without internet connectivity, a requirement that several member states have insisted upon for financial inclusion purposes [1].

Workstream B1 is tasked with designing a certification and approval framework for testing and certifying payment and acceptance solutions used by payment service providers within the digital euro ecosystem. This workstream will define the technical bar that banks, fintechs, and terminal manufacturers must clear before they can offer digital euro services commercially [1].

The RDG's draft rulebook will be updated to reflect the outcome of the EU legislative process. The ECB has been explicit that any decision to issue a digital euro will follow only after the enabling legislation is formally adopted, preserving the primacy of the democratic process in what is ultimately a sovereign monetary policy question [1].

Nine Banks, an MVP, and a Decision Point

The expansion from seven to nine participating banks in Phase II is not merely an incremental numerical gain. Each additional institution brings its own customer base, technical architecture, and compliance environment, stress-testing the digital euro's interoperability claims across a more heterogeneous set of real-world conditions. The diversity of test categories, from tokenized bonds and equities to AI-driven autonomous payments, signals that the ECB and its partners are not limiting ambitions to a narrow peer-to-peer payments use case [1].

The MVP target by the end of Phase II serves a dual purpose. It provides a tangible deliverable that the ECB can present to legislators and the public as evidence of technical readiness, and it gives participating banks a concrete scope against which to build and test their integrations. The MVP delivery will precede, and likely inform, the Governing Council's eventual go or no-go decision on issuance [1].

With nine banks testing six use cases, two active rulebook workstreams, and a legislative majority already secured in the European Parliament, the digital euro project is entering a phase defined less by conceptual debate and more by engineering execution. The Frankfurt conference underscored that the questions are no longer whether a digital euro is desirable, but whether the infrastructure, the rules, and the commercial models can be made ready in time for a 2029 target [1][2].

References

[1] Kiffmeister Chronicles, "Tokenization Archives," March 26, 2026. https://kiffmeister.com/tag/tokenization/

[2] Ledger Insights, "Digital euro wins 420-158 backing in EU Parliament straw poll," February 10, 2026. https://www.ledgerinsights.com/digital-euro-wins-420-158-backing-in-eu-parliament-straw-poll-as-right-divides/