Over the next two years, the ECB will extensively explore the possibilities of a digital euro. But, according to the bank, the first experiments are positive.
The European Central Bank wrote a report on the digital euro nine months ago and has since successfully conducted some experiments. “This made us decide to gear up and start the digital euro project,” said Christine Lagarde, ECB president.
That project is a research phase that will last 24 months. A possible design and distribution must also be considered, but also whether such a digital currency meets the needs of Europeans. At the same time, it must be ensured that it cannot be used for illegal activities or impact financial stability or monetary policy.
However, the ECB emphasizes that there is no guarantee that the digital euro will come to fruition. That judgment will come later. Nor is it intended to replace current financial resources. “In any case, a digital euro will complement cash, not replace it,” the ECB’s press release reads.
In the past nine months, experiments have already been set up around the technical possibilities. These included the digital euro ledger, privacy and anti-money laundering, limits on the circulation of a digital euro and finally access to the virtual currency without internet access and making the currency available on sufficient devices. According to the ECB, no technical obstacles have arisen in any of these experiments.
The next step is to make the project more concrete with the help of focus groups, prototypes, and concepts to design a digital currency without risks and sufficiently accessible to citizens. The ECB will also work closely with the European Commission on this.
Since the rise of crypto coins, more countries, including China, are looking at the possibility of their own digital currency. However, the big problem with ‘classic’ cryptocurrencies is that they are separate from governments and are often unregulated.
This means that cryptocurrencies can develop quickly and that their value can fluctuate wildly. In addition, there is little certainty about the identities of payers or recipients, making cryptocurrencies ideal for scamming or transferring criminal money such as ransomware ransoms.