The European Central Bank (ECB) has been working on the development of the digital euro, a central bank digital currency (CBDC) that will function as an electronic equivalent to cash in the EU. Progress with the digital currency has not been without its hiccups, with the ECB recently publishing a blog post that exploded common myths about the impact of the digital euro to dispel fears of its release.
However, as the digital euro could be pivotal in retail banking and how people in the EU operate financially in the future, it is a good time to catch up on what we know about the digital euro from 2024, and when we can expect further progress .
Digital euro ABCs
Going back to basics, the digital euro will be a digital currency that can be used in the same way as cash in the EU. As a CBDC, it will be backed by central banks and is therefore designed to be safe and secure to use. The digital euro will live in users’ digital wallets, is intended to make payments easier and more seamless.
As of November 2023, the digital euro is in its preparatory phase, which means that the ECB is preparing for its development and use. The investigation phase is complete and now they are one step closer to implementing the CBDC.
Timeline of the digital euro
In 2020, the ECB announced it was leveling investigations into a possible central bank-backed retail CBDC, and in 2021 the two-year investigation phase into the digital euro was greenlit.
In December 2022, the ECB conducted a digital euro prototype exercise to determine how market participants can integrate the CBDC into their ecosystems. The prototype experiment was part of the research phase on how the digital euro would work, and was completed in the first quarter of 2023.
Findings in April 2023 reported that the digital euro would be designed to be available on existing banking apps versus a Eurosystem app. The ECB progress report found that the CBDC will be available to residents, governments and merchants. Cross-border transactions have also been explored, with the possibility of facilitating transactions between select countries with their own CBDCs.
A June 2023 proposal from the European Commission outlined the legal frameworks that will support the rollout of the digital euro, emphasizing that the CBDC will run alongside cash and not replace it. The legislation surrounding CBDCs must be approved by the European Parliament and Council before the digital euro is approved to go live.
In October 2023, the ECB announced the two-year preparatory phase to lay the foundations of the digital currency starting in November 2023. The preparation phase looks at the accessibility, interoperability, security, and will provide information for the decision-making process whether the government will move forward with the digital euro. The Eurosystem is focused on protecting users and providing a digital pan-European payment system that people can access securely offline and online.
In January 2024, the ECB called for applications from providers to run fraud and risk services, offline services, applications, secure exchange of payment information components and more for the digital euro. These contracts can amount to more than €1 billion.
In February of this year, the ECB announced that they are drawing up frameworks if the digital euro is given the green light by EU governments. The ECB board emphasized that they will rely only on European providers to build the digital euro ecosystem.
Digital euro? More like digital where is euro
The creation of a secure and fully operational multi-state digital currency is not an overnight development, but as research into the possibilities of CBDC technology has been ongoing for several years, the question has arisen when we can expect the digital euro to be available for public use.
In September 2022, the ECB confirmed that the digital euro cannot be expected until 2026 at the earliest.
However, Banque de France has stated that since the decision to issue the digital euro has not been taken, and can only be taken once the legislation surrounding the digital currency is defined, the actual issuance of the digital currency may be delayed until 2027 or 2028 become .
It’s going to be a long wait, but we can hope it will be worth it.
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