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The European Central Bank (ECB) has announced they “have decided to launch a project to prepare for possibly issuing a digital euro.”
A two years long investigation phase has now been opened with no design decisions made at this stage.
“It has been nine months since we published our report on a digital euro. In that time, we have carried out further analysis, sought input from citizens and professionals, and conducted some experiments, with encouraging results. All of this has led us to decide to move up a gear and start the digital euro project,” ECB’s President Christine Lagarde said.
During the project’s investigation phase, the Eurosystem will focus on a possible functional design. It will involve focus groups, prototyping and conceptual work.
The investigation phase will examine the use cases that a digital euro should provide as a matter of priority to meet its objectives: a riskless, accessible, and efficient form of digital central bank money, ECB said.
“Our experimentation revealed that existing infrastructure, such as that used by the Eurosystem for instant payments – TARGET Instant Payment Settlement (TIPS) –, as well as distributed ledger technology, could be scaled up to process the roughly 300 billion retail transactions carried out in the euro area each year,” says says Executive Board member Fabio Panetta.
ECB suggested architectures combining centralised and decentralised elements are possible.
Although no design decisions have been made, Panetta previously said that a digital euro must not become “too successful.”
It will be necessary to limit the amount each individual user can hold in digital euros, he said, either through a simple cap, or by introducing a tiered remuneration, so as to avoid bank runs or systemic banking issues that might arise from a digital euro.
“We have been discussing amounts in the order of €2,000, €3,000 — not more than that. In that way, you can use a digital euro as a means of payment, but not as a form of investment,” Panetta said.