The European Central Bank (ECB) recently released the third progress report on the digital euro, presenting design and distribution options endorsed by the Governing Council, and a study detailing the views of people on the features of a potential digital wallet. In this blog post, we’ll discuss the key findings of both publications and their implications for the digital euro project.
- Digital euro accessibility: Initially, the digital euro would be available to euro area residents, merchants, and governments, with potential cross-currency functionalities with other central bank digital currencies outside the euro area. The report states that “non-resident euro area citizens might also have access, provided that they held an account with a euro area-based payment services provider (PSP).”
- Distribution via PSPs: The Governing Council proposes that the digital euro could be distributed via PSPs, as defined in the Payment Services Directive (PSD2). It could be made available to euro area residents via existing banking apps or via an app provided by the Eurosystem offering a harmonized entry point for basic payment functionalities provided by PSPs.
- Core and additional services: Supervised intermediaries (e.g., banks distributing digital euro) would be required to provide a set of mandatory core services to end-users and could offer additional services, such as conditional payments or splitting person-to-person payments among multiple parties.
- Digital wallet features: The study commissioned by the ECB found that most participants were interested in trying some of the digital wallet features presented. The concrete findings are relevant to the design features of a possible digital euro.
Executive Board member Fabio Panetta said, “We value the views and needs of our fellow Europeans very highly. We listen to them. The digital euro project is for the people of Europe.”
Digital Euro Timeline
Digital Euro Timeline. Source: www.ecb.europa.eu
Key Findings from the Study:
- Person-to-person transfers: The study shows that person-to-person money transfers across the euro area are considered an essential feature for a digital wallet.
- Offline payments: Participants valued offline payments, which are currently not widely available, as a useful feature when, for example, someone has limited connectivity.
- Budget management tools and conditional payments: Participants also valued budget management tools and conditional payments, including payment on delivery and pay-per-use.
In autumn 2023, the Governing Council will review the outcome of the investigation phase and decide whether to move on to a subsequent project phase, in which the necessary technical solutions and business arrangements to provide a digital euro could be developed and tested. The decision on the possible issuance of a digital euro will depend on legislative developments with regard to a regulation to establish and govern essential aspects of the digital euro, which would be adopted by the European Parliament and the Council of the EU, following a proposal by the European Commission. The ECB will accommodate any necessary adjustments that may emerge from legislative deliberations in the design of the digital euro.