Eurosystem Proceeds to the Next Phase of the Digital Euro Project

The Governing Council of the European Central Bank (ECB) decided to move to the next phase of the digital euro project, the preparation phase. This decision follows the completion of the investigation phase launched by the Eurosystem in October 2021 to explore possible design and distribution models for a digital euro.

Based on the findings from this phase, the ECB has designed a digital euro that would be widely accessible to citizens and businesses through distribution by supervised intermediaries, such as banks. The design envisages the digital euro as a digital form of cash that could be used for all digital payments throughout the euro area. It would be widely accessible, free for basic use, and available both online and offline.

It would offer the highest level of privacy and allow users to settle payments instantly in central bank money. It could be used from person to person, at the point of sale, in e-commerce, and government transactions. No digital payment instrument offers all these features. The digital euro would fill that gap.

The next phase of the digital euro project, the preparation phase, will start on 1 November 2023 and will initially last two years. It will involve finalizing 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.

“We need to prepare our currency for the future,” said Christine Lagarde, President of the ECB. “We envisage a digital euro as a digital form of cash that can be used for all digital payments, free of charge, and that meets the highest privacy standards. It would coexist alongside physical cash, which will always be available, leaving no one behind.”

The ECB said in a statement that the digital euro would make data protection a priority. “The Eurosystem would not be able to see users’ personal data or link payment information to individuals. The digital euro would also achieve a cash-like level of privacy for offline payments,“ ECB said.

Users could access digital euro services via their payment service provider’s proprietary app and online interface, or a digital euro app provided by the Eurosystem. People without access to a bank account or digital devices would also be able to pay with digital euro, for example by using a card provided by a public body such as a post office. Users would also be able to exchange digital euros for cash or vice versa at cash machines.

The Eurosystem envisions a digital euro that would be free for basic use for individuals. A compensation model between intermediaries and merchants would ensure that there are incentives for intermediaries to distribute digital euro, as is the case for other electronic payment instruments, and that there are adequate safeguards against excessive service charges for merchants. The Eurosystem would bear its costs, including those related to scheme management and settlement processing.