The European Central Bank (ECB) has published a new progress report on its investigation into the possible launch of a digital euro. The research will continue next year, with the regulator planning to make a decision on whether to proceed in the fall of 2023.
ECB to develop rules for distribution of digital euro by intermediaries
The eurozone central bank has published a second report on the digital distribution of the euro on the progress of the survey phase of its plan to issue a digital version of the common European currency. The document presents a set of design and distribution options, recently approved by its Governing Council, and defines the roles of the ECB and market players in the digital euro ecosystem.
Like today’s banknotes, a digital euro would be a liability on the balance sheet of the Eurosystem, the monetary authority of the euro area composed of the ECB and the national central banks of the member states. Therefore, the Eurosystem must have full control over the issuance and settlement of the digital euro, the regulator explains.
Supervised intermediaries, such as credit institutions and payment service providers, will distribute the digital euro to end users – individuals, merchants and businesses – open digital euro wallets, process payments and provide other related services. Their responsibilities will also include conducting “know your customer” and anti-money laundering checks. The ECB also emphasizes that:
Digital euro payments should always be an option, regardless of the entity with which end users open digital euro accounts or wallets and regardless of their country of origin.
In addition, the European Central Bank assures that the design of the digital euro would minimize its involvement in the processing of user data. “The Eurosystem would not be able to deduce the amount of digital euros held by each end-user, nor would it be able to deduce the payment habits of end-users“, the monetary authority said.
The survey phase of the digital euro project was launched in 2021. The ECB published its first progress report in September 2022. Work on a regulation for the distribution system is expected to begin in January. The central bank’s Governing Council will review the results of the research in the fall of 2023 and decide whether to move to a realization phase, a statement detailed.