On 2nd October, the European Central Bank (ECB) announced that it is seriously considering the idea of a digital Euro and that its study of the idea should start by mid-2021.
The ECB report looks at how that might affect payments to retailers now and in the future, as well as look at the ways in which virtual currencies would fit into the whole Euro system. However, the report does not suggest what digital currency model the ECB might use.
The report also suggests that the ECB may start a virtual currency programme in the middle of 2021 “to ensure meaningful answers are obtained to the open questions raised.” It is likely to begin with an investigative phase where numerous experiments are conducted, and there will also need to be a stage in which the ECB consults with all the stakeholders in the Eurozone.
The ECB report also pointed to the idea that digital currencies promote better financial inclusivity, stating: “The possible advantages of a digital euro and the rapid changes in the retail payment landscape imply that the Eurosystem needs to be equipped to issue it in the future. A digital euro could support the Eurosystem’s objectives by providing citizens with access to a safe form of money in the fast-changing digital world. This would support Europe’s drive towards continued innovation. It would also contribute to its strategic autonomy by providing an alternative to foreign payment providers for fast and efficient payments in Europe and beyond.”
There will be several hurdles to jump before a digital euro is created. It must “keep pace with technology” and be available “through standard interoperable front-end solutions throughout the entire euro area and be interoperable with private payment solutions.” It must also match the features of cash in that it must be “easy for everyone to use, be free of charge, and protect privacy.”
The ECB said the digital euro must also be available outside the Eurozone, save costs and be environmentally friendly, signaling that it should be based on technology that minimizes ecological footprints.