While a definitive decision to launch a digital currency has yet to be made, the European Central Bank (ECB) is beginning a two-year project to design a digital euro.
Amid an ever-growing number of efforts to explore central bank digital currencies (CBDCs), the ECB said that it will undertake a project to develop a functional design for a digital euro to meet the needs of its likely users (including businesses, consumers and payments infrastructure), while also preventing illegal activities and avoiding negative effects on financial stability and monetary policy.
The objective is develop a risk-free, accessible form of central bank–issued digital money.
The project will also explore possible legislative changes that may be needed to allow a CBDC to be put into circulation.
“The investigation phase will assess the possible impact of a digital euro on the market, identifying the design options to ensure privacy and avoid risks for euro area citizens, intermediaries and the overall economy. It will also define a business model for supervised intermediaries within the digital euro ecosystem,” the ECB said in a release.
“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,” added Christine Lagarde, president of the ECB.
The ECB reported that its CBDC experiments to date didn’t uncover any major technical obstacles to a digital euro, and it stressed that the required infrastructure would be environmentally friendly.
“For the architectures that were tested, the power used to run tens of thousands of transactions per second is negligible compared with the energy consumption of crypto-assets such as bitcoin,” the ECB said.
“Both the Eurosystem TARGET Instant Payment Settlement and alternatives such as blockchain were proven capable of processing more than 40,000 transactions per second. The experiments also suggested that architectures combining centralised and decentralised elements are possible.”