European Central Bank Demonstrates Commitment to Facilitating Offline Usage of Digital Euro
The European Central Bank (ECB) is set to invest a substantial 1.2 billion euros ($1.3 billion) in a bid to introduce offline payments for a retail digital euro. In its quest to identify service providers for various components, such as risk management, information security, and user application, the ECB allocates over half of the budget specifically for the offline payments service.
While approximately 100 economies globally are contemplating the issuance of a central bank digital currency (CBDC) to embrace the digital era and compete with private cryptocurrencies, the 27-nation European Union is notably proactive in preparing for one. Over the past few years, the ECB has been exploring the possibility of introducing a digital version of the euro, the currency used by approximately 340 million people in 20 EU countries. In 2023, the EU’s executive arm proposed legislation for digital currency, prohibiting interest and extensive holdings while ensuring offline payments from day one.
Despite ECB officials emphasizing that their work on a digital euro does not guarantee its issuance, the recent calls for service providers suggest that the pressure is mounting to deliver on promises outlined in legislative proposals.
An update accompanies the ECB’s recent call for applications on developing a rulebook for the CBDC. While the budget of $1.3 billion may seem substantial, industry experts, such as Jonas Gross, Chairman of the Digital Euro Association (DEA), believe that the ECB’s expectations justify the investment, considering the complexity and perfection required for the product to be implemented successfully in the market.
Offline Payments:
Gross highlights that a significant portion, up to 56%, of the budget is allocated to potential providers for the offline component of the CBDC, indicating the seriousness of the endeavor and the need for expertise to address any lingering questions. Enabling offline payments is considered a crucial challenge in implementing CBDCs, and the ECB aims to introduce two digital euros for retail payments, with one exclusively designed for offline use, including offline holdings.
These recent developments follow the ECB’s shift of its digital euro project into a “preparation phase” in October, focusing on developing a rulebook and selecting providers to contribute to the platform’s construction. The decision to issue a digital euro is contingent on finalizing legislation in the European Parliament, though political challenges may impede approval.
Key Points on Usage of Digital Euro:
• ECB allocates 1.2 billion euros ($1.3 billion) for offline payments in the retail digital euro project.
• Over half of the budget is designated for identifying service providers and covering risk management, information security, and user application development.
• The 27-nation European Union is proactive in preparing for a digital euro amid the global trend of contemplating central bank digital currencies (CBDCs).
• The EU executive proposes legislation in 2023 for the digital euro, emphasizing features like offline payments from the project’s initiation.
• Despite the ECB’s clarification that a digital euro is not guaranteed, calls for service providers indicate increasing pressure to fulfill legislative commitments.
• Industry experts, including Jonas Gross, deem the substantial budget justified, aligning with the complexity and precision needed for successful market implementation.
• A significant 56% of the budget was earmarked for potential providers of the crucial offline component, underscoring its importance in CBDC implementation.
• Enabling offline payments is recognized as a significant hurdle, with plans to introduce two digital euros, one exclusively for offline use, including offline holdings.
• ECB moves the digital euro project to the “preparation phase,” focusing on rulebook development and provider selection, with the final decision contingent on European Parliament legislation.
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