ECB published a report that examines the issuance of a central bank digital currency (CBDC)—the digital euro—from the perspective of the Eurosystem. The Governing Council has not taken a decision yet on whether to introduce a digital euro. This report will serve as a starting point for a public consultation that is expected to be launched on October 12, 2020 to further explore the benefits and challenges associated with a digital euro. ECB states that experimentation will start in parallel, without prejudice to the final decision. Toward mid-2021, the Eurosystem is expected to decide whether to launch a digital euro project, which would start with an investigation phase.
This report, which has been prepared by the Eurosystem High-Level Task Force on CBDC and approved by the Governing Council, first focuses on the reasons for issuing a digital euro, identifies possible scenarios that would require the issuance of a digital euro, and examines the potential effects and implied requirements of a digital euro. The report then explores the legal considerations and discusses the functional design possibilities with respect to a digital euro. Next, the report investigates issues related to the technical and organizational approaches to digital euro services, before finally outlining the follow-up work required before a digital euro can become a reality. As per the report, it is clear that any type of design must fulfil a number of principles and requirements identified in this report—including accessibility, robustness, safety, efficiency, and privacy—while complying with the relevant legislation.
The report explains that the analysis conducted so far has identified principles and requirements that represent the starting point of an assessment of digital euro issuance by the Eurosystem under the given scenarios. The future issuance of a digital euro depends on the results of a comprehensive policy-oriented assessment of its challenges and potential relative to alternative options. Introducing a digital euro is a policy decision and not just a technical one clarifies the report. The extent to which supervised intermediaries and prospective users would favor a digital euro and under what conditions they would be willing to adopt it should also be evaluated. The key messages presented in the report include the following:
- A comprehensive and balanced policy-oriented assessment of the challenges of a digital euro and its potential relative to alternative options is necessary before issuance of the digital euro can be considered. The views of institutions, citizens, and professionals will provide valuable input to this assessment, including through a public consultation.
- Practical experimentation is necessary to test functional design options and explore their technical feasibility as well as their ability to satisfy the needs of prospective users. Experimental work should involve the private sector and prospective users to the extent necessary and should not pre-empt decisions or commit the Eurosystem to providing a digital euro.
- To ensure that meaningful answers are obtained to the open questions raised in this report, the Eurosystem will consider whether to start a digital euro project toward mid-2021, with the possible launch of an investigation phase aimed at developing a minimum viable product.
- In addition to conceptual analysis and practical experimentation by the Eurosystem, the involvement of European and international institutions, fora, and standard-setters would be required to ensure that the digital euro could satisfy the expectations of all prospective stakeholders.
In the report, an ECB representative states that "Looking ahead, we need to be ready to introduce a digital euro, shall the need arise. For now we maintain the options open as to whether and when this should happen."
Keywords: Europe, EU, Banking, CBDC, Digital Currencies, Digital Euro, Cashless Payments, PMI, Fintech, ECB
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