Published: 18.10.2023
  • Governing Council to start digital euro preparation phase following conclusion of two-year investigation phase on design and distribution of a digital euro
  • Preparation phase will lay foundations for a potential digital euro, with work to include finalising rulebook and selecting providers to develop platform and infrastructure
  • Preparation phase will pave way for potential future decision on issuing a digital euro

The Governing Council of the European Central Bank (ECB) decided today to move to the next phase of the digital euro project: the preparation phase.

This decision follows the completion of the investigation phase launched by the Eurosystem in October 2021 to explore possible design and distribution models for a digital euro. Based on the findings from this phase, detailed in a report published today, the ECB has designed a digital euro that would be widely accessible to citizens and businesses through distribution by supervised intermediaries, such as banks.

The design envisages the digital euro as a digital form of cash that could be used for all digital payments throughout the euro area. It would be widely accessible, free for basic use and available both online and offline. It would offer the highest level of privacy and allow users to settle payments instantly in central bank money. It could be used from person to person, at the point of sale, in e-commerce and in government transactions. No digital payment instrument offers all these features. The digital euro would fill that gap.

The next phase of the digital euro project – the preparation phase – will start on 1 November 2023 and will initially last two years. It will involve finalising the digital euro rulebook and selecting providers that could develop a digital euro platform and infrastructure. It will also include testing and experimentation to develop a digital euro that meets both the Eurosystem’s requirements and user needs, for example in terms of user experience, privacy, financial inclusion and environmental footprint. The ECB will continue to engage with the public and all stakeholders during this phase. After two years, the Governing Council will decide whether to move to the next stage of preparations, to pave the way for the possible future issuance and roll-out of a digital euro.

The launch of the preparation phase is not a decision on whether to issue a digital euro. That decision will only be considered by the Governing Council once the European Union’s legislative process has been completed. The ECB will take into account any adjustments to the design of the digital euro that may become necessary as a result of the legislative deliberations.

“We need to prepare our currency for the future,” said Christine Lagarde, President of the ECB. “We envisage a digital euro as a digital form of cash that can be used for all digital payments, free of charge, and that meets the highest privacy standards. It would coexist alongside physical cash, which will always be available, leaving no one behind.”

The digital euro would make data protection a priority. The Eurosystem would not be able to see users’ personal data or link payment information to individuals. The digital euro would also achieve a cash-like level of privacy for offline payments.

The digital euro would promote resilience, competition and innovation in the European payments sector. It would ensure that there is a pan-European payment solution for the euro area under European governance. It would rely on its own infrastructure, thereby strengthening resilience. And it would provide a platform on which European supervised intermediaries could build pan-European services for their customers, increasing efficiency, reducing costs and fostering innovation.

“As people increasingly choose to pay digitally, we should be ready to issue a digital euro alongside cash,” said Fabio Panetta, ECB Executive Board member and Chair of the High-Level Task Force on a digital euro. “A digital euro would increase the efficiency of European payments and contribute to Europe’s strategic autonomy.”

Digital euro distribution

Users could access digital euro services via their payment service provider’s proprietary app and online interface, or via a digital euro app provided by the Eurosystem. People without access to a bank account or digital devices would also be able to pay with digital euro, for example by using a card provided by a public body such as a post office. Users would also be able to exchange digital euro for cash or vice versa at cash machines.

The Eurosystem envisions a digital euro that would be free for basic use for individuals. A compensation model between intermediaries and merchants would ensure that there are incentives for intermediaries to distribute digital euro, as is the case for other electronic payment instruments, and that there are adequate safeguards against excessive service charges for merchants. The Eurosystem would bear its own costs, including those related to scheme management and settlement processing.

Transparency and close cooperation with stakeholders remain key pillars of the project. The Eurosystem has benefited greatly from feedback from European decision-makers, market participants and potential users, and will continue to engage actively with a wide range of stakeholders. We will also continue to cooperate closely with EU legislators.

Latest News

04.03.2024

Depositors of the insolvent AS PNB Banka are requested to receive the guaranteed compensation by 15 August 2024

In accordance with the provisions of Paragraph four of Section 3...
26.02.2024

786.1 million non-cash payments totalling 409.3 billion euro were executed in Latvia in 2023

786.1 million customer non-cash payments totalling...
02.02.2024

Representatives of the Single Resolution Board are visiting Latvia

The representatives of the Single Resolution Board visited Latvia on...
23.01.2024

Priorities and the plan of action in the area of resolution and the compensation scheme have been approved

Latvijas Banka has set the 2024–2026 priorities for resolution and...
08.01.2024

Latvijas Banka has submitted the liquidator's petition for the insolvency of Baltic International Bank SE to the court

Latvijas Banka has submitted to the Court of Economic Affairs the...
28.12.2023

Latvijas Banka reviews Regulation on Credit Risk Management

To promote sustainable and prudent lending, Latvijas Banka has revised...
22.12.2023

Information document for making a public offering: A common approach in the Baltic countries

On 18 December, the Council of Latvijas Banka approved the...
21.12.2023

In assessing financial sector institutions in 2024, Latvijas Banka will pay closer attention to IT security and the availability of financial services

Latvijas Banka has set the financial market supervisory priorities...
18.12.2023

Latvijas Banka's plans in the field of statistics until 2027 approved

Today the Council of Latvijas Banka approved the Statistical Programme...
18.12.2023

Latvijas Banka changes its approach to the application of the countercyclical capital buffer and increases the countercyclical capital buffer rate up to 1%

Taking into account the international experience and acknowledging...
18.12.2023

A Purpose-Based Energy Substitution Structure for CGE

Working paper 7/2023
www.bank.lv
15.12.2023

Macroeconomic forecasts | December 2023

Latvijas Banka has published its latest December 2023...