The European Central Bank (ECB) today said it is working with the European Commission in experiments to consider the merits of minting a ‘digital euro'. However, the regulator was keen to emphasize that it has not yet decided to issue a central bank digital currency (CBDC).
Following the conclusion of the public consultation on 12 January and a period of preparatory work, the Eurosystem will decide whether to pursue a formal CBDC project towards mid-2021.
“Such a project would answer key design and technical questions and provide the ECB with the necessary tools to stand ready to issue a digital euro if such a decision is taken. The ECB and the European Commission services are jointly reviewing at technical level a broad range of policy, legal and technical questions emerging from a possible introduction of a digital euro, taking into account their respective mandates and independence provided for in the Treaties,” it said.
The central bank said it identified two trends in global Payments , one is the increasing consumer preference for digital payments, and the other is the competition to dominate payments on a global scale.
An ECB-backed digital currency would revamp the traditional banking system like P2P transactions, machine-to-machine transactions, and better manage exchange rate and interest rate risk thanks to the programmable capabilities of crypto-like currencies.
The launch of a digital euro has been debated for almost two years now, but the bloc countries and its respective regulators are no closer to launching a unified cryptocurrency for its citizens. The European Central Bank said it would start with an investigation phase to decide whether to pursue or abandon plans to issue a digital euro in less than a year.
The European Commission published in September its EU legislative framework for crypto assets, which came as part of the broader policy initiative on digital finance. The proposal offers a bespoke legislative regime for markets in crypto-assets and relevant service providers not covered elsewhere in the EU financial services regime.
Most recently, the German Finance Minister said he rejects privately-issued digital currencies like Facebook’s Libra and JPMorgan Coin. Furthermore, Berlin said earlier it will work closely with its European and international allies to prevent Cryptocurrencies from becoming alternative currencies.
