The European Central Bank (ECB) has officially announced the commencement of the investigation phase for a digital euro project, marking a significant step in the ongoing evolution of digital finance within the Eurozone in 2021. This decision, made by the Governing Council, underscores the commitment of the ECB to ensuring that European citizens and businesses continue to have access to the safest form of money in an increasingly digital world. Paschal Donohoe, President of the Eurogroup, joined the meeting to express his strong support for this initiative, highlighting the broad political backing for exploring a digital euro.
“Nine months after publishing our comprehensive report on a digital euro, we have deepened our analysis, gathered valuable input from both the public and experts, and conducted encouraging experiments. This rigorous process has led us to the decision to advance to the next stage and launch the digital euro project,” stated ECB President Christine Lagarde. She emphasized, “Our objective is to guarantee that in this digital era, citizens and firms maintain seamless access to central bank money, the most secure form of currency.” This move reflects proactive engagement with the shifting financial landscape and the evolving needs of the European economy in the context of 2021 Euros discussions.
The investigation phase is slated to last for 24 months and will delve into critical aspects of the digital euro’s design and distribution. A core principle guiding this phase is ensuring that the digital euro is tailored to meet the diverse needs of Europeans. Simultaneously, the ECB aims to proactively address potential risks, including the prevention of illicit financial activities and the mitigation of any adverse effects on financial stability and monetary policy. It’s crucial to note that this investigation phase does not predetermine the future issuance of a digital euro; that decision will be made at a later stage. Importantly, the ECB clarifies that a digital euro is envisioned to complement cash, not to replace it, offering a modern option while preserving traditional payment methods within the 2021 euros financial ecosystem.
ECB Board Member Fabio Panetta, who chairs the High-Level Task Force on a digital euro, highlighted the collaborative approach the ECB will adopt. “We are committed to engaging closely with the European Parliament and other key European decision-makers, providing them with regular updates on our progress and findings. Furthermore, we will actively involve citizens, merchants, and the payments industry throughout this investigation phase,” Panetta stated. This inclusive strategy aims to ensure that the development of a digital euro is a transparent and collaborative process, reflecting the needs and concerns of all stakeholders within the 2021 euros framework.
During this two-year investigation, the Eurosystem will prioritize developing a functional design for the digital euro that is firmly rooted in user needs. This will involve a range of methodologies, including focus groups to gather direct feedback, prototyping to test various design features, and in-depth conceptual work to refine the underlying principles. The investigation will specifically examine the most crucial use cases for a digital euro. The goal is to create a digital form of central bank money that is not only riskless and accessible but also highly efficient, serving as a robust foundation for digital transactions within the 2021 euros and beyond.
Furthermore, the project will analyze potential necessary adjustments to the existing EU legislative framework. These considerations will be discussed and ultimately decided upon in collaboration with European co-legislators, ensuring democratic oversight and alignment with broader European legal standards relevant to 2021 euros financial regulations. The ECB will maintain continuous dialogue with the European Parliament and other European policymakers throughout the investigation. Parallel technical work with the European Commission, exploring the practical implementation of a digital euro, will also be intensified, further solidifying the groundwork for potential future deployment within the 2021 euros digital landscape.
A key aspect of the investigation phase is a thorough assessment of the digital euro’s potential impact on the market. This includes identifying optimal design options to safeguard user privacy and mitigate risks for citizens, financial intermediaries, and the broader euro area economy, particularly within the context of 2021 euros market dynamics. The project will also define a viable business model for supervised intermediaries operating within the digital euro ecosystem, ensuring a balanced and sustainable framework. To incorporate diverse perspectives, a market advisory group will be established to gather insights from prospective users and distributors regarding their views on a digital euro. These insights will also be discussed by the Euro Retail Payments Board, further enriching the understanding of stakeholder needs and preferences in the 2021 euros payment environment.
The investigation phase will leverage the extensive experimentation already conducted by the ECB and the national central banks of the euro area over the preceding nine months. This prior work, which involved collaborations with academia and the private sector, provides a valuable foundation of practical knowledge.
Experiments were specifically focused on four key areas: the underlying digital euro ledger technology; privacy mechanisms and anti-money laundering compliance; mechanisms for managing limits on digital euro in circulation; and ensuring end-user access even without a continuous internet connection, alongside promoting inclusiveness through accessible devices. Crucially, these preliminary experiments identified no major technical obstacles to any of the design options assessed, demonstrating the feasibility of various technological pathways for the 2021 euros digital currency initiative.
The experiments also demonstrated the robust performance capabilities of both the Eurosystem’s TARGET Instant Payment Settlement (TIPS) system and alternative technologies like blockchain. Both were proven capable of processing transaction volumes exceeding 40,000 transactions per second. Furthermore, the experiments suggested that hybrid architectures, combining elements of both centralized and decentralized systems, are viable options for a digital euro, offering flexibility in design and implementation within the 2021 euros infrastructure.
The environmental impact of a digital euro core infrastructure was also assessed. The findings indicate that, based on the tested architectures, the power consumption required to process tens of thousands of transactions per second is minimal. This is particularly noteworthy when compared to the substantial energy consumption associated with crypto-assets such as Bitcoin, highlighting the potential for a significantly more environmentally friendly digital currency solution for the 2021 euros and beyond.
These practical findings from the experimentation phase will serve as valuable input, guiding the deeper investigations and design considerations within the newly launched digital euro project, moving the vision of 2021 euros closer to reality.
For media inquiries, please contact Alexandrine Bouilhet, tel.: +49 172 174 93 66, Email: [email protected].
