HomeNewsCBDCEuropean Central Bank Publishes First Update on Digital Euro Progress

European Central Bank Publishes First Update on Digital Euro Progress

Date: 24 June, 2024

The Eurosystem’s digital euro project is moving forward with a clear vision: to ensure central bank money evolves in tandem with current payment preferences and trends, facilitate electronic payments across the euro area, and bolster Europe’s strategic autonomy. The digital euro, envisioned as a retail payment solution issued by the Eurosystem—which includes the European Central Bank (ECB) and the national central banks of the euro area—aims to be available to everyone in all retail payment scenarios across the entire eurozone. This digital currency would complement cash, providing individuals with more choices and offering a secure and accessible payment option. Additionally, a digital euro would enhance Europe’s monetary sovereignty and lessen dependency on large, non-European private payment providers that currently dominate the market.s

Following the completion of the digital euro investigation phase, initiated by the Eurosystem in 2021, the ECB’s Governing Council approved the commencement of a two-year preparation phase on October 18, 2023. This preparation phase, set to last until October 31, 2025, aims to build on the insights gained during the previous phase and lay the groundwork for the potential issuance of a digital euro. The goals of this phase include finalizing the digital euro rulebook, which will establish a uniform set of rules for digital euro payments, and selecting providers capable of developing the digital euro platform and infrastructure. During this phase, the Eurosystem will also conduct further testing and experimentation, focusing on technical aspects such as offline functionality and developing a comprehensive testing and rollout plan.

The digital euro is a collaborative European project, and the technical work during the preparation phase is being carried out alongside the legislative process led by co-legislators. The ECB’s ongoing technical advancements are informing the legislative discussions in the European Parliament and the Council of the European Union, which are deliberating on a proposal presented by the European Commission in June 2023. The ECB is also engaging regularly with various stakeholders, including the public, to ensure the digital euro meets the highest standards of quality, security, privacy, and usability.

By the end of 2025, the ECB’s Governing Council will decide whether to proceed to the next phase of digital euro preparations. The decision to issue a digital euro will only be made after the European Union’s legislative process is complete. The ECB will consider any necessary adjustments to the digital euro’s design that may arise from legislative deliberations.

This report outlines the progress of the digital euro project since the start of the preparation phase. It highlights the results of the technical work conducted in areas such as privacy, offline functionality, and the rulebook. Additionally, the report summarizes the technical contributions provided by the ECB to support the legislative efforts of the European Union.

Privacy has been a cornerstone of the digital euro project from its inception, adhering to a “privacy by design” approach. The public has consistently ranked privacy and data protection as top priorities for a digital euro, prompting the Eurosystem to prioritize these elements at every stage of the project. Ensuring robust privacy and data protection measures will be crucial in gaining public trust and fostering widespread adoption of the digital euro. As the preparation phase progresses, the ECB and its partners will continue to refine the digital euro’s technical and operational aspects, ensuring it meets the needs of users across the euro area. The success of this phase will be critical in determining the future of the digital euro and its role in Europe’s financial ecosystem. With the ongoing commitment to transparency, security, and privacy, the digital euro project aims to create a modern, efficient, and secure payment solution that aligns with the evolving landscape of digital finance.

The Eurosystem’s digital euro project represents a significant step towards modernizing Europe’s payment infrastructure. By addressing current payment preferences and trends while ensuring security and privacy, the digital euro could become a cornerstone of Europe’s financial future. The project’s progress thus far is promising, and the coming years will be crucial in determining its ultimate success and implementation.

Key Points:

  • ECB published inaugural progress report on CBDC development on June 24.
  • Focus on privacy with pseudonymization, hashing, and encryption to prevent tracking.
  • Payment service providers need explicit consent to use consumer financial data.
  • Offline transactions can occur directly between parties without intermediaries.
  • Transactions will be settled on payment devices like smartphones and smart cards.
  • Smart cards may be battery-powered or use relays to sync with the CBDC blockchain.
Reference:

https://cointelegraph.com/news/european-central-bank-first-cbdc-progress-update

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