Eurosystem moves to a new phase of the digital euro project

This move follows the completion of the investigation phase initiated by the Eurosystem in October 2021, which aimed to explore potential design and distribution models for a digital euro. Based on the findings disclosed in a recent report, the ECB has formulated a concept for a digital euro that would be readily accessible to both citizens and businesses through supervised intermediaries, including banks. 

The envisioned digital euro would serve as a digital equivalent of physical currency, designed for facilitating all forms of digital payments across the euro area. It is expected to be accessible to a broad user base, offering basic usage for free and functioning in both online and offline modes. This digital currency would prioritise user privacy, allowing instant settlements in central bank-backed funds. Its intended use encompasses person-to-person transactions, point-of-sale purchases, ecommerce, and government-related payments. The comprehensive features of the digital euro are expected to address a gap in the digital payment landscape. 

The next phase of the digital euro project termed the preparation phase, is scheduled to commence on 1 November 2023, with an initial duration of two years. This phase will involve finalising the digital euro rulebook, selecting suitable providers for developing a digital euro platform and infrastructure, and conducting testing and experimentation to ensure that the digital euro aligns with the Eurosystem's requirements and user preferences. Throughout this phase, the ECB will maintain engagement with the public and all relevant stakeholders. After two years, the Governing Council will evaluate the progress and determine whether to proceed to the subsequent stage of preparations, potentially leading to the issuance and rollout of the digital euro.

The significance of the preparation phase

It is important to note that the initiation of the preparation phase does not constitute a decision to issue the digital euro. Such a decision will only be made by the Governing Council after the completion of the European Union's legislative process, taking into account any adjustments necessitated by legislative deliberations. 

Official representatives from the ECB emphasised the need to prepare the currency for the future, describing the digital euro as a free and privacy-focused digital payment method that will coexist alongside physical cash. The digital euro's privacy features would prioritise data protection, with the Eurosystem unable to access users' personal data or link payment information to individuals. 

Furthermore, the digital euro is expected to support resilience, competition, and innovation in the European payments sector, offering a pan-European payment solution under European governance.