The Governing Council of the European Central Bank (ECB) has launched the exploration phase of the digital euro. It will last 24 months, and the digital currency itself can be issued in 4 years. The organization promised future users compliance with privacy, as well as lower energy consumption than Bitcoin.
The statement of the European Central Bank emphasizes that the digital euro will exist simultaneously with cash. The digital euro will allow users to pay without using coins or banknotes. Government digital currency should complement cash, not replace it. The digital euro will have nothing to do with cryptocurrencies or decentralized Bitcoin.
At the same time, digital euros are not analogous to classical cash. As noted, payments will be anonymous up to 100 euros. In other cases, accounting carried out to combat money laundering, tax evasion and other illegal activities.
As part of the research phase of the digital euro, it is planned to determine the architecture of the digital currency and how it will be distributed. The CBDC must meet the needs of European citizens and, at the same time, help prevent crime. The architecture of the digital euro needs to be thought out so that the new digital currency does not affect the financial stability of the eurozone. This issue they will also explore during the study.
The ECB has already conducted several experiments with the digital euro. The researchers emphasized that the infrastructure of the coin should be environmentally friendly. “The architectures we tested allow tens of thousands of transactions per second. But at the same time, energy consumption is almost negligible. Compared to the consumption of cryptoassets such as Bitcoin”, the statement says.
Why did the ECB decide to develop a digital euro?
Despite the fact that the idea of CBDC has been in the air for a long time, the ECB has never shown a long interest in its study. In the past, the bank’s representatives, including the president Christine Lagarde, allowed its creation, but they never made plans. However, the situation has changed. The discussion of this project began against the background of the fact that Facebook was planning to launch its own currency. Negotiations on this topic became more active during the pandemic, when more people began to buy goods online. And now, as we can see, the organization has announced that “it has decided to start a stage of investigation of the digital euro project”.
Thus, the introduction of the digital euro is part of a plan by European central banks to meet the demand for electronic means of payment. And to counter the boom in “private” digital currencies from Bitcoin to less popular options.
The ECB president added that the final product should provide Europeans with “access to the safest form of money – money center”.
It is possible that the system will resemble an online bank account or a digital wallet. Tied to the computing power of the European Central Bank itself. Unlike an account in commercial banks, this option is much safer. Even in the event of a crisis, the Central Bank, unlike commercial “competitors”, will not run out of euros under any circumstances, although their price may change.
Critics of the new European currency fear that over time, digital money can completely replace paper money. After which total cost control, the introduction of negative interest rates on any deposits and commissions for any transactions not ruled out.