ECB clears the way for the research phase of the digital euro

The Governing Council of the European Central Bank (ECB) has decided to start the research phase for the national digital currency (CBDC).

(THREAD) We have decided to launch a project to prepare for possibly issuing a digital euro. We will look at how a digital euro could be designed and distributed to everyone in the euro area, as well as the impact it would have https://t.co/KCf73qHOZ8 1/3 pic.twitter.com/eHvpFlH8sq

— European Central Bank (@ecb) July 14, 2021

The initiative began in November 2019. In October 2020 the ECB published a comprehensive report on the topic. In November its president Christine Lagarde within four years predicted the emergence of the digital euro.

“Nine months have passed since the CBDC report was published. In that time we deepened our analysis, learned the views of citizens and experts, and also conducted a number of experiments with encouraging results. As a result, we decided to accelerate the process and begin the project of the digital euro,” Lagarde said.

The research phase will last 24 months. During that time, specialists will seek answers to questions relating to the design and distribution of the CBDC.

The statement notes that the digital euro should help combat illicit activity and not have an undesired impact on financial stability and monetary policy. The CBDC will complement, but not replace cash, ECB stressed.

The next phase will also shed light on the necessary changes to the EU regulatory framework. In addition, experts will assess the CBDC’s impact on the market and payment privacy. It is also expected to define a business model for supervised intermediaries within the euro’s digital ecosystem.

The document notes that the CBDC could be based on a mix of centralized and decentralized components. Both options have shown the technical ability to process more than 40,000 TPS.

In May, the Bank for International Settlements called CBDC a concept whose time had come.

Raiffeisen Bank estimates that by 2025 will have their own digital currencies and exchanges to trade them.

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