After months of deliberation, the European Central Bank decided to continue the digital euro project. Officials insisted that, compared with Bitcoin, the new version of the European Common Currency should “ensure privacy” and provide “the safest form of currency” at a “negligible” cost to the environment.
Euro system launches digital euro project
The European Central Bank (ECB) Management Committee made a long-awaited decision on Wednesday to initiate the “investigation phase” of the central bank digital currency (CBDC) project. This phase will last for two years, during which the key aspects of the digital euro design and its distribution will be addressed. In any case, it will not replace cash, and the final decision on its issuance has not yet arrived.
“It’s been nine months since we released the report on the digital euro. During this period, we conducted further analysis, solicited opinions from citizens and professionals, and conducted some experiments with encouraging results. All of this prompted us to decide to speed up. Step forward and launch the digital euro project,” European Central Bank President Christina Lagarde said after the meeting. She also emphasized:
Our work is to ensure that citizens and companies continue to obtain the safest form of currency in the digital age, namely the currency of the central bank.
The euro system, composed of the European Central Bank and the national central banks of the 19 member states of the euro zone, intends to consider the needs of future users when outlining the functional design of the digital euro. The regulator stated in a press release that the investigation phase will involve focus groups, prototyping and conceptual work to examine currency use cases.
The European Central Bank will work with the European Parliament and the European Commission to determine what changes to the EU legislative framework are needed to introduce CBDC. The bank will also assess the possible impact of the digital euro on the market, while ensuring the privacy of its participants and avoiding risks. Regulators want to define business models for regulated intermediaries in the digital euro ecosystem.
European CBDC needs to save energy
The European Central Bank explained that the ultimate goal is to produce a “risk-free, accessible and efficient digital central bank currency” to meet the needs of European citizens and businesses. At the same time, the design of CBDC must prevent illegal activities and adverse effects on the financial stability and monetary policy of the Eurozone.
The investigation phase will build on the experiments conducted by the European Central Bank and central banks in the past few months. They are carried out in several main areas-digital euro ledger, privacy and anti-money laundering, circulation restrictions, offline access by end users and device support.
Tests have proved that one possible solution is to combine centralized and decentralized elements in the digital euro architecture. “Alternatives such as the Euro System TARGET Instant Payment Settlement (TIPS) and blockchain have all been shown to be able to process more than 40,000 transactions per second,” the central bank revealed.
The European Central Bank guarantees that the core infrastructure of European CBDC will be environmentally friendly. The European Central Bank emphasizes that the energy required to maintain high transaction volumes will be “insignificant” compared to the energy required to process cryptocurrency transactions such as Bitcoin.
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