Digital Euro to Offer Secure Public Alternative to Private Payment Methods

The European Central Bank has officially entered the preparation phase for a digital euro. The decision was made on Wednesday after a two-year investigation. This marks a major step toward launching a central bank digital currency for the Eurozone.

The ECB’s Governing Council approved the move to now develop the digital currency’s rules and infrastructure. This next stage will finalize design details and select potential issuer partners. According to Reuters, this phase is expected to last two years.

The digital euro aims to be a digital form of cash, accessible to all citizens and businesses. It would be issued by the Eurosystem and complement physical banknotes. The ECB has emphasized that privacy and security are central to the design.

Officials state it will provide a pan-European payment solution. This would reduce reliance on private, non-European digital payment providers. The move is seen as a response to the growing dominance of major international card schemes and tech giants in payments.

Preparation Phase Focuses on Practical Details and Legal Framework

During the 24-month preparation phase, the ECB will not make a final decision to issue the digital currency. Instead, it will test technical solutions and business models with industry. The work will also involve developing a comprehensive legal framework for the digital euro.

The European Commission recently proposed a legislative basis for the digital currency. This framework will govern its legal tender status, privacy features, and distribution through banks. Final approval from the ECB and European lawmakers will be required after 2025 before any launch can proceed.

The ECB’s advancement of the digital euro project signifies a profound shift in the future of European finance. This digital currency aims to ensure sovereign monetary autonomy in an increasingly digital economy. The coming preparation phase will be critical in shaping the final form of the digital euro.

A quick knowledge drop for you

What is a digital euro?

The digital euro would be a central bank digital currency. It is a digital form of cash issued directly by the European Central Bank. It is designed to be secure, accessible, and free for basic use for everyone in the Eurozone.

When could the digital euro launch?

The current preparation phase is scheduled to last two years. A final decision on issuance would come after that. The earliest possible launch date, pending all approvals, is around 2025.

How will the digital euro protect privacy?

The ECB has stated that privacy is a core principle. It would offer a level of privacy comparable to current digital payments. The Eurosystem itself would not be able to see users’ personal transaction data for individual payments.

Will the digital euro replace cash?

No, the digital euro is intended to complement physical cash, not replace it. The ECB remains committed to issuing euro banknotes. The goal is to give people more choice in how they pay.

How is it different from cryptocurrency?

The digital euro is a central bank liability, making it risk-free and stable in value. Cryptocurrencies like Bitcoin are private, volatile assets. The digital euro’s value is exactly equivalent to a physical euro.

Trusted Sources

European Central Bank (ECB), Reuters, Financial Times, Bloomberg, European Commission.

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