The European Central Bank announced on Wednesday (July 14) that it will begin the investigation phase of its digital euro project.
The bank’s governing council said the investigation will last 24 months and will address “key issues regarding design and distribution,” the ECB news release said.
“A digital euro must be able to meet the needs of Europeans while at the same time helping to prevent illicit activities and avoiding any undesirable impact on financial stability and monetary policy,” the release continued. “This will not prejudge any future decision on the possible issuance of a digital euro, which will come only later. In any event, a digital euro would complement cash, not replace it.”
The investigation will focus on a function design based on the needs of users, involving focus groups, prototypes and conceptual work. “The project will also shed light on the changes to the EU legislative framework which might be needed and that will be discussed with, and decided by, European co-legislators,” the release said. “The ECB will continue to engage with the European Parliament and other European policymakers throughout the project’s investigation phase. The technical work on the digital euro with the European Commission will also be intensified.”
Lastly, the investigation will look at how the digital euro would impact the market, while also identifying design options to ensure privacy and reduce risk.
Last month, the European central banker charged with creating the digital euro said the currency would guard the privacy of consumers while also protecting member states from the loss of monetary sovereignty triggered by the rise of cryptocurrencies and other digital currencies. “If the central bank gets involved in digital payments, privacy is going to be better protected, because we are not like private companies. We have no commercial interest in storing, managing or monetizing the data of users,” said ECB’s Fabio Panetta.
Privacy was the key issue that emerged as the ECB tried to gauge interest in digital currency. Panetta said the developers of a potential ECB currency have looked at ways to separate the identity of participants in a transaction. “The payment will go through, but nobody in the payment chain would have access to all the information,” he said.