The Governing Council of the European Central Bank (ECB) has made a significant decision to proceed to the preparation phase of the digital euro project, marking the next step in the development of a digital euro.
The Eurosystem initiated the investigation phase of the project in October 2021 to explore various design and distribution models for a digital euro. Based on the findings from this phase, detailed in a report published today, the ECB has developed a digital euro concept designed for broad accessibility by citizens and businesses, distributed through supervised intermediaries, such as banks.
The envisaged digital euro would serve as a digital equivalent of cash, facilitating digital payments across the euro area. It would be easily accessible, offer free basic use, work both online and offline, provide high levels of privacy, and enable instant settlements in central bank money. The digital euro could be used for person-to-person transactions, point-of-sale purchases, e-commerce, and government transactions.
The next phase, the preparation phase, will commence on November 1, 2023, lasting initially for two years. It involves finalizing the digital euro rulebook, selecting providers for a digital euro platform and infrastructure, and conducting testing and experimentation to meet Eurosystem requirements and user needs in terms of privacy, user experience, financial inclusion, and environmental impact. The ECB will maintain engagement with the public and stakeholders throughout this phase. After two years, the Governing Council will determine whether to proceed to the next phase, potentially leading to the issuance and rollout of a digital euro.
It’s important to note that the launch of the preparation phase does not constitute a decision to issue a digital euro. That decision will only be considered once the European Union’s legislative process is completed. Any adjustments to the digital euro’s design, which may be necessary due to legislative deliberations, will be taken into account.
Christine Lagarde, President of the ECB, emphasized the need to prepare the currency for the future, envisioning a digital euro as a versatile form of digital cash that is cost-free and adheres to high privacy standards.
The digital euro would prioritize data protection, ensuring that the Eurosystem cannot access users’ personal data or link payment information to individuals. For offline payments, it would provide a level of privacy similar to cash.
The digital euro is expected to foster resilience, competition, and innovation in the European payments sector. It would establish a pan-European payment solution under European governance, rely on its infrastructure, and serve as a platform for European intermediaries to build pan-European services for their customers.
Users would access digital euro services via their payment service provider’s proprietary app or online interface, or through a digital euro app provided by the Eurosystem. Those without bank accounts or digital devices could use a card provided by a public entity, such as a post office, to make payments. Digital euro could also be exchanged for cash at ATMs.
The Eurosystem’s vision is to offer a digital euro for basic individual use free of charge. A compensation model between intermediaries and merchants would ensure incentives for intermediaries to distribute digital euro, with safeguards against excessive service charges for merchants. The Eurosystem would bear its own costs, including scheme management and settlement processing.
Transparency and collaboration with stakeholders remain central to the project. The Eurosystem will actively engage with a wide range of stakeholders, including European decision-makers, market participants, and potential users. It will also closely cooperate with EU legislators throughout the project.
