FRANKFURT: The European Central Bank took a major step toward a digital euro yesterday, approving an “investigation phase” that could ultimately lead to a virtual currency being implemented around the middle of the decade.
The next stage will last 24 months and aims to address key issues on design and distribution, the ECB said in a statement.
It also said the decision “will not prejudge any future decision on the possible issuance of a digital euro, which will come only later. In any event, a digital euro would complement cash, not replace it.”
President Christine Lagarde has been enthusiastic about a central bank digital currency, and the ECB has warned that failing to implement one could undermine the bloc’s monetary autonomy as payment providers such as foreign technology giants gain ground.
If the ECB eventually adopts a virtual currency, it’ll likely follow in the footsteps of China, where trials have started in several cities. Eastern Caribbean islands that share a central bank, including Grenada and St Kitts and Nevis, have already launched their own versions.
The US Federal Reserve and Bank of England are looking into the possibilities for their economies.
The likely features of a digital euro are already crystallising, with research and official remarks portraying a payment system that is fast, easy to use, and secure. Crucially for Lagarde, who has lambasted private crypto-assets, it would also offer an alternative to bitcoin and its peers.
“It has been nine months since we published our report on a digital euro. In that time, we have carried out further analysis, sought input from citizens and professionals, and conducted some experiments, with encouraging results, ” Lagarde said in a statement. “All of this has led us to decide to move up a gear and start the digital euro project.”
The ECB said that experiments so far show that a digital euro core infrastructure would be environmentally friendly – using “negligible” power compared to crypto-assets such as bitcoin. — Bloomberg