Digital euro as additional payment method; shift to preparation phase

The Eurosystem is exploring the possibility of issuing its own central bank digital currency – a digital euro. This would represent a response to changes in the area of payments brought about by digitalisation, and would provide the population an additional secure and trusted payment method.

The investigation phase of the digital euro project thus began in October 2021, and brought answers to basic questions regarding the design and distribution possibilities of a digital euro. Yesterday, the Governing Council of the ECB adopted a decision to proceed to the next, preparation phase, the aim of which is to draft a technical rulebook for the digital euro scheme, and to select providers to develop the necessary platform and infrastructure. The Governing Council’s final decision on the issuing of a digital euro will be made following the adoption of the legal framework, which was presented by the European Commission this June.

In October 2021, the ECB began the investigation phase for the digital euro in order to provide answers to basic questions regarding the design and distribution possibilities of a digital euro. In accordance with the findings of the aforementioned phase, the digital euro would be the next step in the evolution of the currency, and could be used in conjunction with cash in person-to-person transactions, at points of sale, in online stores and in transactions by government authorities across the euro area.

It would have the characteristics of cash, such as:

(i) the protection of privacy;
(ii) offline payments;
(iii) free public service;
(iv) payments anywhere in the euro area; and
(v) fixed value.

Users would be able to access digital euro services via a smartphone application or using a card issued by a public institution. They would also be able to exchange the digital euro for cash or vice versa at ATMs.

The Governing Council of the ECB adopted a decision yesterday to proceed to the so-called preparation phase, which will initially last two years and include:

(i) the finalisation of a digital euro rulebook;
(ii) the selection of providers who will develop a digital euro platform and infrastructure; and
(iii) testing and experimentation.

The necessary legal framework, under the auspices of the European Commission, will be established in parallel. The Commission presented proposed legislation back in June this year, while the ratification process is ongoing. The Governing Council will issue its final decision following the adoption of the legal framework.

Details are available in a press release on the ECB’s website.