The European Central Bank (ECB) is gearing up to bolster the euro’s digital future. In an announcement made today, the ECB disclosed its decision to transition into the next stage of the digital euro project, marking the commencement of the preparation phase.
This development comes on the heels of an extensive investigation phase that began in October 2021. The primary objective was to deliberate on potential designs and distribution mechanisms for the digital currency. A newly unveiled report offers insights into the ECB’s vision: a digital euro that’s as ubiquitous as physical cash, facilitated through regulated intermediaries like banks.
Distinctive from other digital payment tools, the digital euro proposes a revolutionary payment medium. It promises features like instant settlement in central bank money, high-level privacy, and offline usability. Its application stretches from peer-to-peer transactions to e-commerce and government dealings.
November 1, 2023, will see the inauguration of this new phase, which is set to span two years. Its agenda includes refining the digital euro’s guidelines, selecting potential providers for platform development, and extensive testing to ensure the digital currency aligns with both the Eurosystem’s standards and user expectations. Public engagement remains a core tenet throughout.
However, this progression doesn’t implicitly mean the issuance of a digital euro is certain. The Governing Council will await the culmination of the EU’s legislative process before reaching any conclusions. Christine Lagarde, ECB President, accentuated the intent, stating, “We need to prepare our currency for the future.” She emphasised the envisioned digital euro’s role as a complementary form to physical cash, ensuring no citizen is left behind.
A significant focus for the digital euro will be data protection. Users can take solace in the fact that the Eurosystem will neither access their personal data nor associate payment details with individuals. Offline payments will enjoy a cash-equivalent level of privacy.
Fabio Panetta, an ECB Executive Board member, championed the initiative, highlighting the importance of being ready as digital payments gain traction. The digital euro aims to enhance the efficiency of European transactions and bolster Europe’s strategic independence.
On the distribution front, the digital euro will be accessible through proprietary apps provided by payment service providers or via a dedicated app from the Eurosystem. Even those without bank accounts or digital devices are considered in this digital transition; they could leverage a card issued by public bodies like post offices. Furthermore, digital euros can be exchanged with cash at ATMs.
In terms of costs, basic digital euro services for individuals will be free. A structured compensation model is being envisaged to ensure that intermediaries are incentivised, and merchants are shielded from exorbitant service charges.
In closing, the Eurosystem’s commitment to transparency and stakeholder collaboration remains unwavering. Feedback from European leaders, market players, and potential users has been invaluable, and the Eurosystem intends to maintain this interactive approach. Close coordination with EU legislators is also a priority as the project advances.
