ECB completes digital euro prototypes, decision on development pending
The European Central Bank (ECB), which is the central bank of the European Union, has released two reports on its market research and prototyping exercise as part of the investigation phase of its digital euro project.
The Eurosystem, which is made up of the ECB and the national central banks of EU countries that use the euro, has invited market participants to take part in the market research. This was to help them “understand the industry-specific knowledge and ongoing experience of building potential technical solutions for a digital euro.”
The research shows that there are enough European providers who can develop digital euro solutions. The report also suggests that different types of architectural and technological design options are available to build a technical solution for a digital euro,” according to the Frankfurt-based bank.
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From July 2022 to February 2023, the ECB conducted a prototyping exercise to see what paying with a digital euro could be like for various use cases. The exercise included the integration of five user interfaces developed by several providers for each use case (front-end prototypes) and a settlement system that the Eurosystem designed and developed (back-end prototype).
The tests showed that it is possible to smoothly integrate a digital euro into the existing payment landscape while still allowing the market to use innovative features and technologies when distributing a digital euro. The findings also confirmed that a digital euro could work online and offline using different technical designs, according to the ECB.
However, the bank concluded that there remains the question of whether an offline solution that complies with the Eurosystem’s requirements and delivers the necessary scale can be delivered in the short to medium term with the existing tech.
Forthcoming decision
The EU launched its digital euro project in October 2021, and the ECB’s Governing Council is expected to decide in autumn 2023 whether to proceed with a preparation phase to develop and test the EU’s designed central bank digital currency (CBDC). “If the Governing Council opts to go ahead with a preparation phase, this does not necessarily mean that it will issue a digital euro. The Governing Council will take a dedicated decision on whether to issue a digital euro at a later stage,” according to the bank.
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