- May 25, 2022
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The investigation phase of the digital euro project will last 24 months. Its design will be based on users’ preferences and technical advice.
The
Governing Council of the European Central Bank (ECB) has decided July 14th
to launch the investigation phase of a digital euro project. Following the
decision, the President of the Eurogroup Paschal Donohoe joined the meeting,
congratulated the Governing Council and expressed his full support for the
project.
“It has been
nine months since we published our report on a digital euro. In that time, we
have carried out further analysis, sought input from citizens and
professionals, and conducted some experiments, with encouraging results. All of
this has led us to decide to move up a gear and start the digital euro
project”, says ECB President Christine Lagarde. “Our work aims to ensure
that in the digital age citizens and firms continue to have access to the
safest form of money, central bank money”.
The
investigation phase will last 24 months and aim to address key issues regarding
design and distribution. A digital euro must be able to meet the needs of
Europeans while at the same time helping to prevent illicit activities and
avoiding any undesirable impact on financial stability and monetary policy.
This will not prejudge any future decision on the possible issuance of a
digital euro, which will come only later. In any event, a digital euro would
complement cash, not replace it.
“We will
engage with the European Parliament and other European decision-makers and
inform them regularly about our findings. Citizens, merchants and the payments
industry will also be involved”, says ECB Board Member Fabio Panetta, Chair of
the High-Level Task Force on a digital euro.
During the
project’s investigation phase, the Eurosystem will focus on a possible
functional design that is based on users’ needs. It will involve focus groups,
prototyping and conceptual work. The investigation phase will examine the use
cases that a digital euro should provide as a matter of priority to meet its
objectives: a riskless, accessible, and efficient form of digital central bank
money.
The project
will also shed light on the changes to the EU legislative framework which might
be needed and that will be discussed with, and decided by, European
co-legislators. The ECB will continue to engage with the European Parliament
and other European policymakers throughout the project’s investigation phase.
The technical work on the digital euro with the European Commission will also be
intensified.
Finally, the
investigation phase will assess the possible impact of a digital euro on the
market, identifying the design options to ensure privacy and avoid risks for
euro area citizens, intermediaries and the overall economy. It will also define
a business model for supervised intermediaries within the digital euro
ecosystem. A market advisory group will take account of prospective users’ and
distributors’ views of a digital euro during the investigation phase. Those
views will also be discussed by the Euro Retail Payments Board.
The
investigation phase will benefit from the experimentation work done by the ECB and the euro area national central banks over
the past nine months, which has involved participants from academia and the
private sector.
Experiments
were conducted in the four following areas: the digital euro ledger; privacy
and anti-money laundering; limits on digital euro in circulation; end-user
access while not connected to the internet and facilitating inclusiveness with
appropriate devices. No major technical obstacles were identified to any of the
assessed design options.
Both the
Eurosystem TARGET Instant Payment Settlement (TIPS) and alternatives such as
blockchain were proven capable of processing more than 40,000 transactions per
second. The experiments also suggested that architectures combining centralised
and decentralised elements are possible.
According to
these experiments, a digital euro core infrastructure would be environmentally
friendly: for the architectures that were tested, the power used to run tens of
thousands of transactions per second is negligible compared with the energy
consumption of crypto-assets such as bitcoin.
These
practical findings will provide useful input for the investigation phase.
Press
release by ECB
More
information about digital euro project HERE.