The ECB presents the progress of the digital euro

The ECB has just published its second progress report on the preparation phase of the digital euro. This publication covers the updating of its regulations and the examination of the expectations of consumers, retailers and payment service providers. It also clarifies the position of the digital euro in relation to other advanced initiatives.

FACTS

• A public initiative led by the European Central Bank (ECB), the Digital Euro aims to create a digital version of the euro that complements physical cash and enables secure and accessible electronic payments in the euro zone.

• The ECB is now publishing a call for tender to select applications from external service providers (including merchants, payment service providers, financial technology companies and universities) to roll out its project and test innovative new uses. The results of this procedure will be published on the ECB website in 2025.

• The ECB also states that it intends to develop its project in line with the expectations of key stakeholders, in particular consumers and small retailers. Surveys and online interviews will be conducted over the coming months. The results will be published mid-2025.

• On the regulatory front, the ECB is also working with experts from Eurosystem national central banks and competent national authorities to develop a methodology for setting limits on the holding of digital euros.

CHALLENGES

• The European Central Bank has long been working on its digital euro project. In fact, it made a point of clarifying its vision of a Central Bank Digital Currency (CBDC) in January 2023, but has chosen this end-of-year period to really underline its efforts and bring its initiative to fruition.

• Reassuring the market: His efforts are all the more important now that the digital euro is not the only promise of interoperability when it comes to launching a common digital payment solution in Europe. In fact, Wero is progressing in parallel, and banks are currently ensuring its effective roll-out to European consumers.

• Confirming positions: While the two initiatives, Wero and the digital euro, share the same objective of sovereignty, they are also in competition in certain areas of use, offering a fast, dematerialized payment solution, notably via a digital wallet. Last June, the French Senate underlined the risk of a “misalignment between the digital euro project and that of EPI (European Payments Initiative)”, but also expressed the hope that the projects would complement each other. EPI could thus provide a technological support for the distribution of the digital euro.

MARKET PERSPECTIVE

• The ECB has already outlined its plans for the digital euro and its deployment in September 2022. At the time, the European Central Bank announced the signing of major new partnerships to support its project. CaixaBank and Amazon were among the players involved. And while EPI is not directly involved in the project to create the digital euro, the ECB has never concealed its support for projects aimed at developing pan-European payment solutions such as EPI.

• In October 2022, the Banque de France took part in the new digital euro trials, followed by Spanish banks, marking a further step in the project's progress.