The European Central Bank (ECB) continues to work on its plan to set up a digital euro. It has just named five companies responsible for developing the prototypes of the user interfaces.
The European Central Bank (ECB) is slowly continuing to implement its digital euro project, a secure currency for digital exchanges, including for individuals, which will complement traditional money – coins and notes. Indeed, many countries are working on creating their own Digital Central Bank Currency (MNBC), like China with the digital yuan, and central banks are gearing up to get into the race. In Europe, the idea germinated a few years ago, and is slowly taking shape. Officially launched in 2021, the project first goes through a survey phase, aiming to find out more about the expectations of businesses and European citizens on the design, distribution and use of this digital euro. A phase of reflection and study which will last until the end of 2023. At the same time, the European Commission is working on the preparation of a bill aimed at regulating it. For now, the ECB has just designated the five companies who will have the honor of developing prototypes of user interfaces, and thus simulating transactions.
Digital euro: a challenge of the future
On his websitethe ECB imagines the digital euro “like euro banknotes, but digital. It would be electronic money, issued by the Eurosystem (the ECB and the national central banks of the euro zone), and accessible to all citizens and businesses.” To simplify, it’s like like the virtual representation of fiat money – what we use when we pay by bank card – but without certain characteristics of fiat money – but we do not yet know exactly which ones or how put them in place… If such a currency succeeded in seeing the light of day, it would mean that central and commercial banks would see their role profoundly modified. The digital euro would exist alongside cash, without replacing it, and would come as a response to the growing demand for electronic payments and the significant decline in the use of cash. Indeed, we are witnessing a growing dematerialization of payments, reinforced since the Covid-19 epidemic – where e-commerce has proved essential during confinement, and where electronic payment has made it possible to avoid contamination by touching . In some countries like Belgium, the law even obliges merchants to accept electronic payments, whether via a terminal or a smartphone application.
But, unlike cryptocurrency, the digital euro would not be speculative, since it would be issued by the Eurosystem. It will, paradoxically, have to respond to problems of confidentiality but also of traceability – by making it possible to fight against tax evasion and money laundering in particular. It should also enable faster and more secure transactions, thanks to the blockchain – a technology for storing and transmitting data in the form of blocks linked to each other, without any central or intermediary body, which makes it possible to gain in transparency, security and speed.
Digital currency: an international project
Five companies have been chosen by the ECB from among 54 candidates who came forward after a call for interest launched in April 2022. Each selected company will have to design the prototype of a potential user interface for the digital euro – which will not be not then reused for the final interface – in order to test the reliability of using such a currency, and to focus on a specific use case. The Spanish bank CaixaBank will take care of peer-to-peer online payments – between individuals –; the French payment and transaction services company Worldline will handle offline peer-to-peer payments; Italian firm Nexi will focus on merchant-initiated point-of-sale payments; the European Payment Initiative consortium – a payment project aimed at competing with Mastercard and Visa – will work on payer-initiated point-of-sale payments; the giant Amazon will take care of payments for e-commerce.
This prototyping phase should last about six months, i.e. until the end of the first quarter of 2023. If the results are conclusive, the digital euro should see in 2026, in addition to the traditional euro. However, although hundreds of countries are seriously thinking of having their own MNBC, it is necessary to clearly define the operation and use of such a currency. And, above all, to convince individuals to use it instead of traditional means of payment, which is not a foregone conclusion…