ECB Advances Digital Euro Project as it Prepares for Key Decision

The European Central Bank (ECB) is making progress with its digital euro project, moving it into a phase of planning that might serve as the basis for a decision to issue a central bank digital currency (CBDC) in the future.

The ECB has come under fire for its CBDC plans as the two-year inquiry phase comes to an end. The preparatory phase, which will start in November and extend for two years, will be used to complete a digital euro rulebook, choose platform suppliers, and carry out thorough testing.

In order to pave the way for the future issue and implementation of a digital euro, as stated on Wednesday, the ECB’s governing council will think about advancing to the next stage of preparations.

It’s crucial to make it clear that this change from the planning stage does not imply a choice to issue a digital euro. A choice won’t be made until the legislative process for the European Union is over, according to the ECB. The European Commission started the complicated, possibly multi-year process of creating the legal basis for a digital euro in June.

The head of the digital euro project and a departing member of the ECB Executive Board, Fabio Panetta, highlighted that this action does not pre-empt or predict how the legislative process would turn out.

Mixed Reactions to the Move

The ECB’s decision to advance the project has not been universally praised. Some believe it may be premature, given that the ECB has not sufficiently communicated the added value of the digital euro. Markus Ferber, a member of the European Parliament’s economic affairs committee and a CBDC skeptic, stated, “It would have been smarter for the European Central Bank to wait with its preparation phase until the European legislator has concluded its deliberations.”

He did add, though, that the two years of planning could provide the ECB a chance to improve the CBDC so that it can live up to its potential as a virtual currency.

The digital euro project has advanced with the ECB’s entry into the planning phase, but the ultimate choice regarding issue will rely on how the legislative procedure turns out and on other considerations.