European Central Bank moves to next phase of digital euro

The Governing Council of the European Central Bank (ECB) has recently announced it was moving onto the next phase of the digital euro project, starting to lay the foundations for its possible issuance next month, although it has not yet made a definite decision on issuing it.

Specifically, the preparation phase for this central bank digital currency (CBDC) follows the conclusion of a two-year research of its design and distribution and aims to “lay foundations for a potential digital euro,” the ECB said in a press release published on October 18.

“This decision follows the completion of the investigation phase launched by the Eurosystem in October 2021 to explore possible design and distribution models for a digital euro.”

What next phase entails

According to the statement, moving to the next phase envisions “finalizing rulebook and selecting providers to develop platform and infrastructure” for the currency on the basis of the findings detailed in a summary report for the previous phase, titled ‘A stocktake on the digital euro.’ 

As per the press release, the next phase, which the press release refers to as the preparation phase, will begin on 1 November 2023 “and will initially last two years,” including testing and experimentation to develop a digital euro that meets both the Eurosystem’s requirements and user needs.”

That said, the Governing Council will only decide after these two years whether it would “move to the next stage of preparations, to pave the way for the possible future issuance and roll-out of a digital euro,” stressing that “the launch of the preparation phase is not a decision on whether to issue a digital euro,” which means that the currency is still a long way to go.

Commenting on the development, the ECB president Christine Lagarde said:

“We need to prepare our currency for the future. (…) We envisage a digital euro as a digital form of cash that can be used for all digital payments, free of charge, and that meets the highest privacy standards. It would coexist alongside physical cash, which will always be available, leaving no one behind.”

Digital euro and privacy concerns

Earlier, Lagarde strongly defended the digital euro project, saying the currency “will not be completely anonymous as is the case with a banknote,” after some members of the European Parliament voiced their concerns regarding its impact on user data privacy, as Finbold reported in September.

Back in March, she had also admitted that “there will be control” after the issuance of the digital euro, albeit specifying that it would be a “limited amount of control,” during a prank interview in which Lagarde believed she was talking to the Ukrainian President Volodymyr Zelensky.