The ECB decides to move to the “preparation phase” of the digital euro

2023-10-18 17:28:16

The Governing Council of the European Central Bank (ECB) has decided today to move to the next phase of the digital euro project, called the preparation phase, which will last two years, after having completed the “research phase”, which began in October 2021. “The beginning of the preparation phase is not a decision on the issuance of a digital euro,” emphasizes the ECB, since the Governing Council of the institution “will not consider this decision until the legislative process of the European Union has concluded.

What the ECB does make clear is that the digital euro would be widely accessible to citizens and companies through its distribution through supervised intermediaries, such as credit institutions.

The digital euro would be a digital form of cash that could be used for all digital payments throughout the euro area. It would be widely accessible, free for basic use and available with or without an Internet connection. It would offer the highest level of privacy and allow users to immediately settle payments in central bank money. It could be used in operations between individuals, at points of sale, in electronic commerce and with Public Administrations. No digital payment instrument offers all of these features. The digital euro would fill this gap, the Bank of Spain emphasizes.

To avoid massive transfers from retail deposits to the ECB that would affect the banks and the economy, the central bank is considering limiting the amount that individuals will be able to have in digital euros to 3,000 euros – it remains to be defined how much will be allowed to companies and businesses. . Furthermore, digital euro accounts could be in banks to avoid impacts on financial stability.

A path to follow to prevent stable cryptocurrencies (known as ‘stablecoins’) or perhaps digital currencies from other central banks from taking over. The vice president of the ECB, Luis de Guindos, has long insisted that the European Union “cannot sit idly” in the face of private and foreign digital currencies, since if their widespread use for international payments is allowed it could be called into question. the attractiveness of the euro and threaten the monetary sovereignty of the central bank and “its ability as a lender of last resort.”

The effective implementation of the digital euro will not occur before 2026, which is actually a very short period for everything that needs to be done.