The European Central Bank (ECB) is currently as close as possible to launching a digital euro.
In a press release that was published last Wednesday, October 18, the specified financial institution announced that a two-year stage of preparation for the release of CBDC will be launched on November 1.
As part of the preparatory period, the list of rules for virtual currency will be finalized. Also, during the two years, the ECB will start searching for suppliers who will be able to assist in creating a platform and infrastructure for the digital euro.
The press release states that the preparatory activity, which will begin on November 1, provides for testing and experiments on the development of a virtual currency that meets the requirements of the Eurosystem and the needs of users, for example, in terms of the specifics of their experience with money, and confidentiality. Also, within the framework of this work, attention will be paid to the availability of financial services and the impact of the digital euro on the environment.
The press release also contains information that in 2025 the ECB Governing Council will decide to move to the next stage of preparation for the introduction of virtual currency or abandon the implementation of this project. Currently, it is difficult to predict what the future of the digital euro will be and whether it will be at all. The decision of the ECB Governing Council will depend on the results of the preparatory period, which will begin in less than two weeks.
The digital euro project does not have unanimous approval in society. The media reports that the opponents of the implementation of this financial initiative are bankers and regulators. The critics of the idea of introducing the digital euro form their position on this issue based on fears that the virtual currency may contribute to the fact that deposits will be outside the commercial sector. Some scientists, privacy protection services of the European Union, and certain consumer groups are also skeptical about the prospects for the implementation of the digital money project and do not consider appropriate efforts necessary.
German member of the European Parliament Markus Ferber said that the ECB has not yet provided a clear answer to the question about the added value of the digital euro.
Also this week, criticism of the CBDC was recorded in the public space of the United States. The head of the Federal Reserve System, Michelle Bowman, during a speech at an event at Harvard Law School on Tuesday, October 16, expressed concern about the potential risks associated with the introduction of virtual currency. According to her, there is still no convincing argument in favor of CBDC being able to reduce friction within the payment system compared to alternatives such as the instant financial operations platform of the corresponding category FedNow ® Service.
At the same time, research results have shown that virtual currencies of central banks will help compensate for the volatility of cross-border payment transactions. Also, some experts believe that digital money will increase transparency and liquidity.
As we have reported earlier, Spain’s Deputy Central Bank Governor Suggests Tools to Mitigate Digital Euro’s Unintended Consequences.