ECB enters next phase for digital Euro
The European Central Bank (ECB) is taking another step toward the introduction of a digital Euro. After a two-year investigation period, the ECB Council decided to initiate the next phase on Wednesday – a preparatory phase expected to initially last two years. "We need to prepare our currency for the future," said ECB President Christine Lagarde. A formal decision on the introduction has not yet been made, but it is considered highly likely. According to Bundesbank board member Burkhard Balz, it is expected to take at least four to five more years until the launch.
Like most central banks globally, the ECB has intensified its efforts on a digital central bank currency in recent years. This is partly due to the declining use of cash and the desire to defend the state's monetary monopoly against private providers in an era of increasing digitization. However, the project is controversial. Critics express concerns about data privacy and warn of risks to financial stability. Moreover, many citizens are not convinced of the benefits of the digital Euro.
Seeking intermediaries for digital Euro
In October 2021, the Eurosystem, consisting of the ECB and the 20 national central banks, initiated an investigation phase. Based on the results, the ECB has now designed a digital Euro. As per the ECB, it would be provided by supervised intermediaries, such as banks, making it accessible to the general public. In the next phase starting on November 1st, the regulatory framework for the digital Euro will be finalized, and providers capable of developing a platform and infrastructure will be selected. After two years, the ECB Council will decide whether to proceed to the next phase of preparations.
The Deutsche Kreditwirtschaft (DK) expressed a positive view on Wednesday. "A well-designed digital Euro can offer added value for the economy and society". Nevertheless, the DK also emphasized the need to consider the risks and engage in a democratic debate.
Former ECB Executive Board member Lorenzo Bini Smaghi, who is now Chairman at Société Générale, expressed a more critical opinion. "It is not yet clear what benefits a digital Euro issued by the central bank with a limited wallet of 3,000 euros per person would bring to citizens compared to existing mass payments that will continue to evolve with technology, and whether it is worth the cost," said Bini Smaghi to Börsen-Zeitung.