After nine months of experimentation, the ECB is embarking on a two-year investigation phase to examine the issue of a digital euro
The European Central Bank (ECB) announced yesterday that it is launching a project to study the possible issuance and distribution of a digital euro and its impact.
ECB President Christine Lagarde said:”Nine months have passed since the publication of our report on a digital euro. During this time, we carried out further analyses, obtained the opinions of citizens and experts and carried out some experiments. The results were encouraging. All this has led us to shift up a gear and start a project to test a digital euro. With our work, we want to ensure that citizens and companies have access to the safest form of money, central bank money, even in the digital age.“
Over the past nine months, the ECB has worked with academics and private sector members to conduct experiments in key areas, namely restrictions on the circulating digital euro, money laundering and privacy, the Digital Euro ledger and inclusivity and accessibility for users when they are not connected to the Internet.
No significant technical problems have occurred in these experiments. They showed that it would be possible to integrate both centralized and decentralized elements in the same architecture.
The ECB concluded that it could use either blockchain or the Eurosystem TARGET Instant Payment Settlement (TIPS) to process more than 40,000 transactions per second with relatively low power consumption and therefore negligible environmental impact.
These findings feed into the first phase of the digital Euro project, which is basically a two-year investigation phase. It examines important aspects of development and distribution so that a digital euro can help prevent illegal activities while meeting the needs of users.
With the help of prototyping and focus groups, the ECB is investigating use cases for the digital euro and its possible effects on monetary policy and financial stability. The study phase is intended to show whether the digital euro requires a change in the EU legal framework
ECB Board Member Fabio Panetta added: “We will work with the European Parliament and other European decision-makers and keep them regularly informed of our findings. Citizens, merchants and the payment industry will also be involved.“
The announcement stressed that the project is not a guarantee that a digital euro will be issued. But if this were the case, then he would not replace the physical money, but supplement it.