The European Central Bank (ECB) announced this Wednesday, October 18, the launch of “the preparatory phase”, comprising tests and experiments, of the digital euro, designed as a response to the increasing dematerialization of payments and cryptocurrencies.
“We must prepare our currency for the future,” declared the President of the ECB, Christine Lagarde, in a press release, at the end of two years of evaluation of the project. This “preparatory” phase will also have an initial duration of two years and “will pave the way for a future decision” on the possible issuance of a digital euro.
This “preparatory” phase will also have an initial duration of two years and “will pave the way for a future decision” on the possible issuance of a digital euro. The launch of the preparatory phase therefore does not constitute a green light for the creation of a digital euro. This decision will only be considered by the ECB Governing Council once the European Union legislative process has been completed. The European authorities – Parliament, Commission, Council, Eurogroup – have yet to give the digital euro an official status.
“We envision the digital euro as a digital form of cash that could be used for all digital payments, free of charge, and which would guarantee the highest level of confidentiality” to a currency expected to be used daily by nearly 350 million people. Europeans, underlined Christine Lagarde.
The ECB, which notes the continued reduction in cash settlements in an increasingly digital economy, must “prepare to issue a digital euro alongside cash”, indicated Fabio Panetta, member of the ECB executive board.
Distrust and misinformation
Above all, the digital euro raises concerns fueled by disinformation campaigns. Internet users claim on social networks that it would aim to eliminate cash to allow widespread surveillance of citizens, through the control of their purchases and financial transactions.
The digital euro is not intended to replace cash, the ECB has always insisted, which is simultaneously preparing a new series of bank notes. The future virtual currency is also planned to serve as a platform allowing European financial intermediaries to offer payment services available throughout the euro zone. The digital euro is intended to be an alternative in a European card payment market dominated by two players, Visa and Mastercard, whose cards themselves are not accepted everywhere.
Its distribution would be ensured by approved banks and fintechs. The ECB is getting involved at a time when around a hundred central banks around the world, notably in China, the United Kingdom and the United States, are also working on issuing their own digital currencies. The Frankfurt-based institution fears that the proliferation of virtual currencies, private or national, could undermine the influence of the single European currency. “A digital euro would strengthen the efficiency of European payments and contribute to Europe’s strategic autonomy,” noted Fabio Panetta.