On 14th July, the Governing Council of the European Central Bank (ECB) launched the investigation phase of the Digital Euro program to last 24 months, an important step that could lead to the allocation of a Central Bank Digital Currency (CBDC) in the Eurozone.

President of ECB, Christine Lagarde says related to 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.” The digital euro will be like a digital wallet which is equal to banknotes and coins that Eurozone citizens can easily keep at the ECB. It is a part of central banks’ initiative to meet the growing demand for e-payments and tackle flourishing private sector digital cryptocurrencies from BTC to Facebook’s Diem.

Wednesday’s announcement refers to the beginning of a 24 months investigation phase, during which process the ECB will work to develop a functional CBDC prototype while addressing queries related to its impact on financial policy, monetary stability and illegal activity. This program will also assess necessary changes to the European Union legislative framework.

What is Digital Euro?

A digital euro will combine the productivity of a fast, easy digital payment with the security of central bank money. In the upcoming days, Digital Euro will be a mode of payments like digitalized banknotes and coins issued by the ECB which will be available to all citizens and firms. Though it is not a replacement of cash, rather complement.

Digital euro will support the digitalization of the European economy and actively encourage innovation in retail payments. The ECB has surveyed using its own instant payment system in combination with digital ledger technology to distribute digital euros and has founded it facilitated programmability.

Following the announcement, it also published the design to be based on user’ preference and technical advice by the merchants and intermediaries. And also launched the preliminary experimentation phase of identifying no technical obstacles. “We will engage with the European Parliament and other European decision-makers and inform them regularly about our findings. Citizens, merchants, and the payments industry will also be involved”, said Fabio Panetta, ECB Executive Board member.

Joyashree Dey

CBW - External Analyst

INDIA