Long reads

EU CBDC: What do we know so far about the digital euro?

Sehrish Alikhan

Sehrish Alikhan

Reporter, Finextra

The European Central Bank (ECB) has been working on developing the digital euro, a central bank digital currency (CBDC) that would operate as an electronic equivalent to cash in the EU. The progress on the digital currency has not been without its hiccups, with the ECB recently publishing blog post debunking common myths on the impact of the digital euro to dissipate fears of its release.

However, as the digital euro could be pivotal in retail banking and how people in the EU operate financially in the future, it’s a good time to catch up on what we know about the digital euro as of 2024, and what when we can expect further advancements.

Digital euro ABCs

Going back to the basics, the digital euro will be a digital currency that can be used the same way as cash in the EU. As a CBDC, it will be backed by central banks and therefore is designed to be secure and safe to use. The digital euro will live in users’ digital wallets, are intended to make making payments easier and more seamless.

As of November 2023, the digital euro is in its preparation phase, which means that the ECB is preparing for its development and usage. The investigation phase has been completed and now they are one step closer to implementing the CBDC.

Timeline of the digital euro

In 2020, the ECB announced that it was levelling up investigations into a possible central bank-backed retail CBDC, and in 2021 the two-year investigation phase into the digital euro was greenlit.

In December 2022, the ECB was running a digital euro prototyping exercise to determine how market participants could integrate the CBDC into their ecosystems. The prototyping experiment was a part of the research phase into how the digital euro would operate, and was completed in the first quarter of 2023.

Findings in April 2023 reported that the digital euro would be designed to be available on existing banking apps vis a Eurosystem app. The progress report from the ECB found that the CBDC would be available for residents, governments, and merchants. Cross-border transaction was also being explored, with the possibility of facilitating transactions between select countries with their own CBDCs.

A June 2023 proposal from the European Commission outlined the legal frameworks that would support the rollout of the digital euro, emphasising that the CBDC would run alongside cash and not replace it. The legislation around CBDCs needs to be approved by the European Parliament and Council before the digital euro is approved to go live.

In October 2023, the ECB announced the two-year preparation phase to lay the foundations of the digital currency starting in November 2023. The preparation phase looks into the accessibility, interoperability, security, and will provide information for the decision-making process of whether the government will move forward with the digital euro. The Eurosystem is focused on protecting users and providing a digital pan-European payment system that people can access securely offline and online.

In January 2024, the ECB called for applications from vendors to run services for fraud and risk, offline services, app, secure exchange of payment information components, and more for the digital euro. These contracts could total more than €1 billion.

In February this year, the ECB announced that they are drawing out frameworks if the digital euro is greenlit by EU governments. The ECB board highlighted that they will only rely on European suppliers to build the digital euro ecosystem.

Digital euro? More like digital where are euro

The creation of a secure and fully operational multi-state digital currency is not an overnight development, but as research into the possibilities of CBDC technologies have been underway for several years the question has arisen into when we can expect the digital euro to become available for public use.

In September 2022, the ECB confirmed that the digital euro cannot be expected until 2026 at the earliest.  

However, Banque de France stated that as the decision to issue the digital euro has not been made, and can only be made once the legislation around the digital currency has been defined, the actual issuance of the digital currency could be stretched to 2027 or 2028.

It will be a long wait, but we can hope that it will be worth it.

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