The ECB is intensifying technical and policy work towards a digital euro in order to create ecofriendly, digitalised central bank money.
The European Central Bank (ECB) has announced today (14 July) that it will commence a 24-month investigation phase regarding the implementation of a digital euro.
This investigation phase will aim to address key issues regarding design and distribution.
The ECB says a digital euro must be able to meet the needs of Europeans while at the same time helping to prevent illicit activities and avoiding any undesirable impact on financial stability and monetary policy.
The organisation has highlighted that any implemented digital currency will complement cash rather than replace it.
“It has been nine months since we published our report on a digital euro. In that time, we have carried out further analysis, sought input from citizens and professionals, and conducted some experiments, with encouraging results. All of this has led us to decide to move up a gear and start the digital euro project,” said ECB president Christine Lagarde.
“Our work aims to ensure that in the digital age citizens and firms continue to have access to the safest form of money, central bank money.”
The investigation will involve focus groups, prototyping and conceptual work. The ECB wants to establish the uses of a digital euro to create a riskless, accessible and efficient form of digital central bank money.
The ECB and national central banks in the Eurozone have carried out preliminary experimental work over the past nine months, which has involved participants from academia and the private sector.
Our experimental work has already allowed us to identify possible ways to protect privacy. It has also shown that the energy needs of the infrastructure would be negligible compared with the energy consumption and environmental footprint of crypto-assets, such as bitcoin 2/3
— European Central Bank (@ecb) July 14, 2021
Experiments focused on four main areas: the digital euro ledger, privacy and anti-money laundering, limits on digital euro in circulation, and end-user access while not connected to the internet and facilitating inclusiveness with appropriate devices.
The ECB highlighted that no major technical obstacles were identified in the assessed design options.
The assessed methods were capable of handling more than 40,000 transactions per second and it would be possible to combine centralised and decentralised elements.
Importantly, the prototype infrastructure that was tested was shown to be environmentally friendly with negligible energy use when compared to other modern cryptocurrencies such as bitcoin.
The ECB has stated that it will continue to engage with the European Parliament and other European policymakers throughout the project’s investigation phase, while intensifying its technical work.