ECB enters a new phase on path to digital euro

By James Langton | October 18, 2023 | Last updated on October 18, 2023
2 min read
Investment analysis
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A digital euro is one step closer, with the governing council of the European Central Bank (ECB) deciding to move ahead, following a two-year exploration of the idea.

The ECB announced it will embark on a new phase of the project, which will lay the foundations for a potential central bank digital currency (CBDC). That work will include drafting a rulebook, and selecting platform and infrastructure developers.

At this point, the ECB still hasn’t decided whether it will launch a digital euro. This next step is intended to help inform that ultimate recommendation.

The decision to proceed to the next step follows the conclusion of an investigation into possible design and distribution models for a CBDC.

The central bank published a report today setting out its proposed model, which imagines distributing a digital euro through regulated intermediaries, such as traditional banks. It would allow users to access digital euro services through a provider’s app, or online, or through an app provided by the ECB.

While it envisions a system that allows consumers to use digital euros for free, the ECB said that, “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 proposed design would allow person-to-person transactions, e-commerce payments, and government transactions, that would settle instantly in central bank money.

“No digital payment instrument offers all these features. The digital euro would fill that gap,” it said.

The next phase will start Nov. 1, and is expected to last for two years.

“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,” it said.

“We need to prepare our currency for the future,” said Christine Lagarde, president of the ECB, in a release.

“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,” she added.

The bank said that a digital euro would also “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,” it said.

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James Langton

James is a senior reporter for and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.