The E-euro project

Introduction

We are entering the era of digital currency. It is gradually emerging in response to changes in society and the evolution of technology. Therefore, from the European Union comes the proposal of the E-euro: the project of a digital currency issued by the European Central Bank. The European Parliament, the European Commission, the European Council and the Eurogroup encourage the development of a new digital currency, stressing its importance in order to create a highly innovative financial sector and a highly resilient payments system. The aim is to hypothetically launch the new digital currency after a two-year testing phase.

The E-euro project steps

On July 14, 2021, the ECB decided to launch a project for the possible introduction of the digital euro. The main objective was to develop a solution in line with the needs of the payments system. The final decision on the actual issuance of the digital euro will be taken at a later stage, being understood that the new digital currency would work alongside cash, without replacing it. The launch of such a project follows an exploratory phase that began in September 2020.

  • The Digital Euro Report

The first step, in October 2020, was the publication of the Eurosystem’s Digital Euro Report . The report laid the groundwork for the project. Especially, it identified the reasons that may make it necessary to issue a digital Euro. The Eurosystem task force on digital currency of central banks has started an experimental work in order to evaluate further insights on the technological feasibility of the project choices identified in the Report, grouping them in 4 main areas of analysis: the digital euro ledger, privacy and anti-money laundering, the limits of the digital euro in circulation and the final use by users.

  • The public consultation on the digital Euro

The second step after the publication of the Eurosystem report was the launch of a public consultation on the digital Euro, the results of which was available on April 14, 2021. The responses received emphasized that both individual users and businesses consider privacy, security, and broad usability to be the most important aspects of a digital euro.

Strengths of the E-euro

– With cash, all euro-area citizens have access to a cost-free, secure and universally accepted means of payment. With the digital euro, all euro-area citizens have access to secure and universally accepted payments, including payments made online or by digital means: a digital Euro would reduce the cost of transactions and promote financial inclusion, stimulating further approach to Blockchain technology by governments, banks, institutions.

– The digital Euro would be very secure. Like cash, it would represent a claim on the central bank. Therefore it would have no liquidity, credit or market risk. 

– Being offered by the central bank, the digital Euro would protect the privacy of citizens. Protecting it from exploitation of information for profit and intrusions. 

– A digital Euro would encourage innovation and stimulate competition, enabling both small and large intermediaries to improve their service offerings. By providing products that include access to the digital Euro, European players could raise the quality of the products they make available to the public. They would remain competitive despite the steady expansion of global technology giants in financial and payment services. 

– The digital Euro would safeguard the central role of central bank currency in the payments system. This would strengthen Europe’s autonomy in the digital age.

Questions still open

– The introduction of a new form of central bank currency requires defining the necessary operational and technological requirements, precisely identifying the technical characteristics that are still in analysis phase.

-The definition of how to ensure that the digital Euro will be a means of payment. Not only an investment instrument, in order to avoid risks to financial stability.

– A further question concerns the possibility of using the local memory of users’ devices in order to make off-line payments. These and other decisions are closely intertwined, and will require consistent choices in order to ensure system efficiency and functionality.

Conclusions

The work carried out so far has highlighted the many potentialities of a digital Euro. EU will have to decide whether it is preferable a decentralized or decentralized technological infrastructure, however it will be in any case under the control of the Eurosystem. The E-Euro, in case it will exist, will be successful first of all if it brings advantages to the stakeholders. Namely, citizens, traders and financial intermediaries. The Eurosystem will carry out this project with the utmost caution. In line with the objective of preserving both monetary and financial stability, but also with that of evolving the monetary landscape in favour of its users.