The European Central Bank (ECB) today said it is working with the European Commission in experiments to consider the merits of minting a ‘digital euro’. However, the regulator was keen to emphasize that it has not yet decided to issue a central bank digital currency (CBDC).
Following the conclusion of the public consultation on 12 January and a period of preparatory work, the Eurosystem will decide whether to pursue a formal CBDC project towards mid-2021.
“Such a project would answer key design and technical questions and provide the ECB with the necessary tools to stand ready to issue a digital euro if such a decision is taken. The ECB and the European Commission services are jointly reviewing at technical level a broad range of policy, legal and technical questions emerging from a possible introduction of a digital euro, taking into account their respective mandates and independence provided for in the Treaties,” it said.
The central bank said it identified two trends in global payments, one is the increasing consumer preference for digital payments, and the other is the competition to dominate payments on a global scale.
An ECB-backed digital currency would revamp the traditional banking system like P2P transactions, machine-to-machine transactions, and better manage exchange rate and interest rate risk thanks to the programmable capabilities of crypto-like currencies.
The launch of a digital euro has been debated for almost two years now, but the bloc countries and its respective regulators are no closer to launching a unified cryptocurrency for its citizens. The European Central Bank said it would start with an investigation phase to decide whether to pursue or abandon plans to issue a digital euro in less than a year.
The European Commission published in September its EU legislative framework for crypto assets, which came as part of the broader policy initiative on digital finance. The proposal offers a bespoke legislative regime for markets in crypto-assets and relevant service providers not covered elsewhere in the EU financial services regime.
Most recently, the German Finance Minister said he rejects privately-issued digital currencies like Facebook’s Libra and JPMorgan Coin. Furthermore, Berlin said earlier it will work closely with its European and international allies to prevent cryptocurrencies from becoming alternative currencies.