After long and intensive discussions at the European level, the starting signal for the digital euro was given on 14 July 2021. First, core questions on the impact on financial stability and monetary policy as well as on the legal framework and a possible technical implementation will be clarified within the framework of a two-year study phase. The goal of the introduction of the digital euro is still to meet the “needs of the people in Europe” and to serve as a supplement to already established payment procedures.
A final decision on the design of the digital euro is then expected after the study phase in mid-2023.
“We will enter into a dialogue with the European Parliament and other European decision-makers and inform them regularly about our findings. Individuals, merchants and the payments sector will also be involved,” said Fabio Panetta (Member of the ECB Executive Board and Chair of the Digital Euro Task Force).
Results of the practical test
The preparatory basis for the landmark decision was the results of a practical test phase over nine months, which examined, among other things, technical aspects of distributed ledger technology (DLT for short), data protection, anti-money laundering and the use of existing systems (e.g. TARGET Instant Payment Settlement — TIPS for short). Energy aspects of possible architecture concepts were also investigated with the aim of limiting energy consumption to well below the current requirements of known cryptocurrencies, e.g. Bitcoin.
Focus on data protection
Consumer protection and data protection aspects are central aspects of the discussion about the digital euro, in addition to the technical implementation. For consumers, the digital central bank money represents a direct claim against the central bank, which under certain circumstances can be limited by a cap in the “wallet”. The competition of the digital euro with cash becomes clear in the discussion about the anonymity of payments. It seems clear that — also with a view to combating money laundering — there will be no completely anonymous digital euro.
Assessment of the German Banking Industry
In a statement, the “Deutsche Kreditwirtschaft” emphasises the digital euro above all in its preservation of the monetary sovereignty of the Eurozone. The digital euro is assessed as a forward-looking means of payment in a digital economy, which coherently complements the existing and proven systems and structures. The aim should be to achieve the greatest possible synergies with existing payment solutions so that access to the digital central bank money can be secured for end consumers. There is a consensus that digitalisation is changing payment transactions and that the ECB must carefully design the digital euro to ensure financial stability. In order to implement the envisaged activities, high investments are inevitable for both the institutions and the economy.
Will cryptocurrencies become more than speculative objects?
Established cryptocurrencies such as Bitcoin and Co. are gaining importance as speculation objects in asset management, but they are currently rather meaningless in payment transactions. Nevertheless, the ongoing discussion about private cryptocurrencies, e.g. Diem from the Facebook universe, has certainly driven the discussion about the Digital Euro.
The SRC experts follow the exciting developments in the field of cryptocurrency and the Digital Euro for you and support you in the realisation of your crypto custody service. We will be happy to inform you about the possibilities to get involved in this innovative sector.