The European Central Bank (ECB) today took the first step towards launching a digital euro. Its plans are tied to a global effort to meet the growing demand for electronic payments, but according to Reuters, it also wants to deal with the cryptocurrency boom.
The digital euro, as the electronic equivalent of banknotes and coins, is likely to take the form of a digital wallet that eurozone citizens can hold with the European Central Bank, rather than with commercial banks.
The European Central Bank Governing Council today launched a green investigation phase for the project, which should last for two years and be followed by a three-year implementation.
The main goal of this initiative is to prevent the private sector from taking control of digital payments, especially if the use of physical cash begins to decline, as happened in Sweden.
“The goal of our work is to ensure that citizens and businesses have access to the most secure form of money, even central bank money, in the digital age,” said Christine Lagarde, president of the European Central Bank.
The European Central Bank will now begin working on the digital euro and discussing it with stakeholders – from banks to retailers. The EU treaties did not provide for a digital euro, so the process would not be possible without legislative changes.
The central bank will also define the role of banks and fintech companies, which are likely to offer digital wallets to their clients on behalf of the European Central Bank. The European Central Bank tested the project last year and did not identify any major technical drawbacks to public ledgers, privacy protections, or offline digital currency use.
Work on the digital euro gained momentum when the American internet company Facebook presented a plan to create its own currency in 2019.