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.