Two years have been spent exploring the possible design and distribution of a digital euro. Now, the Governing Council of the ECB is moving to the next phase of the project. Known as the preparation phase, this will lay the foundations for a potential digital euro. However, this does not mean that any decision has yet been made as to whether a digital euro will actually be issued. The Governing Council will decide on this at a later stage, once the European Union’s legislative process has been completed. Back in late June 2023, the European Commission presented a proposal for a regulation on the establishment of the digital euro. This proposal will be deliberated by the Council of the European Union and the European Parliament in the coming weeks and months. In a press release published by the ECB, it stated that it would take into account any adjustments to the design of the digital euro that may become necessary as a result of the legislative deliberations.

Preparation phase to last two years

The preparation phase of the digital euro project will start on 1 November 2023 and will initially last two years. It will involve finalising the digital euro rulebook and selecting providers that could develop a digital euro platform and infrastructure. It will also include testing and experimentation to develop a digital euro that meets both the Eurosystem’s requirements and user needs, for example in terms of user experience, privacy, financial inclusion and environmental footprint. According to the press release, the ECB will continue to engage with the public and all stakeholders during this phase. After two years, the Governing Council will decide whether to move to the next stage of preparations, to pave the way for the possible future issuance and roll-out of a digital euro.

What would a digital euro be?

A digital euro would be a digital form of central bank money, specifically the euro. It would be issued by the central banks of the euro area and could therefore be used by all citizens in a similar way to cash – only in virtual form. Alongside cash, the Eurosystem would thus supply households with an additional form of central bank money that can be used quickly, easily and securely. At any given time, one digital euro corresponds to €1: in other words, ten digital euros would have the same value as a €10 banknote. The digital euro would therefore not be a new or additional currency, but rather an extra, new and innovative means of payment. The aim of the digital euro is to offer the public a risk-free, universal and efficient form of digital central bank currency. With that in mind, it needs to be usable for all payments: at the point of sale, when shopping online, for person-to-person payments and for transactions with public authorities.

The digital euro project

The digital euro project was launched in July 2021. At that time, the Governing Council decided to enter into a two-year investigation phase on the digital euro from October 2021 onwards. During this phase, the Eurosystem focused on a possible functional design that was, in turn, based on users’ needs. To this end, focus groups were set up, prototypes were created and conceptual work was advanced. Protecting citizens’ privacy was given high priority throughout the process. The Eurosystem also investigated various use cases for a digital euro, and analysed the potential impact of a digital euro on the market. The project also focused on whether changes to the EU legal framework might be necessary to eventually introduce a digital euro.