The ECB moves forward with plans to create a digital Euro and digital wallets for consumers.
In July, the Frankfurt-based European Central Bank (ECB) surrendered to a growing demand for digital currencies and offered up a calendar of development for the digital euro. The new digital currency, which will compete with private sector counterparts such as Bitcoin as well as government-backed fiat ones such as the Chinese digital yuan, e-CNY, may become a reality in five years or so, according to the plan.
The ECB foresees two years for an investigation phase that includes focus groups and prototyping. The product that emerges from the process will then need to be ratified by the ECB governing council. Implementation measures over another three years will follow. The digital euro will also require legislative changes, because it is not included in existing EU treaties.
The European digital wallet will have a limit of perhaps 3,000 euros per person; as it is intended to complement cash, not replace it. The Covid-19 pandemic increased demand for cashless transactions; but in 2019, cash still represented 73% of all peer-to-peer and point-of-sale transactions in the euro area, according to a survey by the central bank.
As the ECB will never run out of euros, it will be much safer than any private counterpart. At the same time, it will probably not be possible to use the ECB’s digital euro anonymously.
“Our work aims to ensure that in the digital age citizens and firms continue to have access to the safest form of money, central bank money,” Christine Lagarde, the president of the ECB, said in a statement, while presenting the development plans.
In its preliminary documents, the ECB has also said that the new digital euro’s energy needs will be minimal, unlike Bitcoin.