European Central Bank Announces Next Step of Digital Euro Initiative

The European Central Bank (ECB) has today announced its advancement to the preparation stage for the digital euro initiative

This follows an investigation stage initiated in October 2021, and a proposal outlined in June 2023.

This preliminary stage was aimed at comprehending the potential framework and distribution channels for a digital euro.

A report was then published based on the findings.

Digital Euro Rollout

The ECB's vision for the digital euro is to provide both citizens and companies with access through regulated financial institutions, such as banks.

This digital alternative to physical cash is designed to facilitate various online and offline transactions throughout the eurozone.

The ECB underscores that no existing digital payment system currently combines all these essential features.

Scheduled to commence on November 1, 2023, the preparation stage is expected to last for an initial duration of two years.

During this period, the ECB will focus on finalising the digital euro's regulations and selecting suitable companies to build its technological infrastructure.

Additionally, rigorous testing will be conducted to ensure compliance with regulatory standards and user expectations, including considerations of user-friendliness, privacy, financial inclusion, and ecological sustainability.

Public participation and stakeholder engagement will persist during this phase.

May Not Launch

Following this two-year span, the ECB will assess whether to proceed further towards a potential launch of the digital euro.

As with all stablecoin testing, entering the preparation phase does not indicate a commitment to issuing a digital euro.

The final decision will only come after the European Union legislative processes have been met.

Adjustments to the digital euro design may be necessary based on the outcomes of these legislative deliberations.

The digital euro will be accessible through specialised applications provided by payment service providers or directly from the Eurosystem.

Even individuals without a bank account or digital devices will have access to the digital euro through mechanisms like cards issued by public institutions.

The ECB intends to develop a financial model that involves financial institutions and vendors to encourage the distribution of digital euros while protecting against excessive fees for sellers.