The European Central Bank (ECB) is set to start a 2-year investigation into the possibility of launching a digital euro. Experimental work that was conducted by the ECB in the last nine months found that no major technical obstacles to any of the assessed and reviewed design options for the Target Instant Payments Settlement System and other alternatives including blockchain.
Experiments also indicated that architectures integrating centralized and decentralized elements are possible. ECB President Christine Lagarde said:
“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. 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.”
In the project’s investigation phase, the Eurosystem will focus mainly on a possible functional design that is mainly based on the users’ needs, according to Lagarde. It will consist of focus groups, prototyping, and conceptual work.
This project is also expected to shed some light on the changes to the European Union legislative infrastructure that may be necessary after Brexit. The technical work on the digital euro with the European Commission will also be enhanced.
To sum it all up, the investigation phase assesses the possible impact of a digital euro on the market, identifying the design options to guarantee privacy and avoid risks for euro area residents, intermediaries, and the general economy. It also defines a business model for supervised intermediaries within the digital euro ecosystem.
ECB board member Fabio Panetta stated:
“In concrete terms, this means that we will commit the resources necessary to design a marketable product. But a decision about whether or not to issue a digital euro will only come at a later stage. And in any event, a digital euro would complement cash, not replace it.”
A market advisory group will take account of the prospective users’ and distributors’ views of a digital euro during the investigation phase. These views will also get discussed by the Euro Retail Payments Board.
“Our aim is to be ready, at the end of these two years, to start developing a digital euro, which could take around three years.”