Key Takeaways:
- The European Central Bank has decided to press ahead with launching a digital euro
- The first part, investigation phase, will take two years, another two will be needed until the official release
The ECB to Take First Steps Toward Launching a Digital Euro
The European Central Bank confirmed last week it will start working on a digital euro project. The ECB will start this project to meet the rising demand from Europeans to have their own currency digitalized.
The project, as outlined on the ECB’s official website, is set to take off to its initial phase that would last 24 months. The first part of the project would be to explore the technology and the inherent risks and possibilities that underline a digital euro.
The actual implementation and official launch of a central bank digital currency for the euro zone is expected to happen some time in 2024. It is still not certain whether the ECB would opt for blockchain. It is also considering a new market infrastructure service created by Eurosystem called TARGET Instant Payment Settlement (TIPS). Both technologies are capable of processing more than 40,000 transactions per second. In addition, it is not yet clear whether the architecture of the project would be centralized, decentralized, or a combination of both.
“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”, says ECB President Christine Lagarde. “Our work aims to ensure that in the digital age citizens and firms continue to have access to the safest form of money, central bank money”.
A Digital Euro Would Not Replace the Current Fiat System
The central-bank backed digital currency would only “complement” the already existing monetary system. The currency would by no means aim to replace it.
Discussions over a digital euro have been growing in popularity this year. In April, the European Central Bank released a public survey that showed Europeans were open to a potential digitalization of the single European currency. Moreover, the ECB also issued a warning to governments that they should seriously consider central bank digital currencies (CBDCs). Otherwise, they could risk losing monetary autonomy.
In the meantime, developed countries like Canada, the US, and the UK are diligently studying the field of digital currencies Their intention is to launch digital versions of their own sovereign currencies.