Half-time whistle – the ECB's first assessment of the two-year "digital euro" analysis phase

As reported in a previous blog post, the European Central Bank (ECB) has started a two-year analysis project in October 2021 to assess how the digital euro should be designed. The outcome of this analysis phase will be a decision on whether and in what form the ECB provides the digital euro.

At the halfway point of the two-year period, an interim report was published by the ECB on 29 September 2022. This report highlights many of the questions and theses we addressed in the previous blog series on the digital euro. Thus, the ECB report takes up the progress made and addresses the basic design options for the digital euro that were recently approved by the ECB Governing Council. In this article we would like to explain what these are in a compact way:

Online and offline payment execution
Currently, the ECB is focusing on the following two transaction options:

  1. Execution of online transactions validated by an intermediary
  2. Execution of offline transactions in a peer-to-peer context that are validated directly or without an intermediary

Data protection, anonymity and credit control
In terms of consumer confidence, the ECB Governing Council describes in its report that the digital euro is expected to have similar data protection provisions as current digital payment methods. Low value payments are to receive higher data protection than payments with comparable maximum amounts. A fully anonymous payment execution without amount limits is currently not planned.
In addition, it is being considered that limits be introduced to control the credit balances. The aim is to restrict the use of the digital euro so as not to artificially create an alternative form of investment for consumers.

Important milestones in 2023

  1. In the first quarter of 2023 the European Commission will prepare a proposal for a regulation on the introduction of the digital euro.
  2. By the end of October 2023 the ECB Governing Council is to decide whether and how the development of the digital euro will continue. The following phase can extend over three subsequent years.
Source: ECB

Public funds as a catalyst?
Even if the half-term review still leaves much room for interpretation and design, initial tendencies are becoming clear. Similar to what is described in the report, we as PPI see that public funds in digital form can make an important contribution to the digital age. The digital euro in the current consumer context would be an important first cornerstone. We are therefore continuing to follow this topic with great enthusiasm and will continue to follow developments on the digital euro closely in the EBICS blog.
Until next time.

Author: Philipp Schröder