European Central Bank reports on the progress of preparations for the launch of the digital euro

What’s new? The European Central Bank (ECB) has published a second progress report on preparations for the launch of the digital euro. It addressed, among other issues, a limit on the amount of digital assets available to hold in the wallet, as well as the harmonization of the legal framework within the EU. The document is an interim phase of the preparatory phase, which follows the research and development phases.

Source: X.com

What else is known? The digital euro is a national cryptocurrency or Central Bank Digital Currency (CBDC). The ECB will issue it and represents the third form of fiat currency alongside cash and non-cash money.

A special working group responsible for creating the rules for the digital euro has launched seven sub-groups comprising EU central banks and market participants to continue its development. These rules are intended to harmonize national laws to guarantee universal standards for the asset.

Australia’s Central Bank did not see any advantages in the introduction of retail CBDC

The regulator will focus on developing and launching a wholesale version of the digital national currency

Read more

Research is also ongoing to profile potential users of the digital euro to determine their needs. Attention is being paid to aspects such as user preferences for storage limits, among others, which will be considered in technical studies with national central banks.

That said, Politico reported in October that storage limits have been a point of contention between the ECB and national central banks. Authorities in leading EU countries, including France and Germany, believe it is wrong for the ECB to be given sole control over how much digital currency citizens will be allowed to store in their wallets.

Thus, if the limit is high, citizens could withdraw huge amounts from traditional banks during a crisis, jeopardizing the stability of the entire banking system.

The new document cites a mechanism that would automatically transfer excess digital euros into fiat to a user’s wallet-linked bank account as one option for maintaining the limit.

The ECB has been developing the asset for several years, expecting it to ease reliance on dominant payment services from the US and other non-EU countries such as Visa and Mastercard, which currently process around 70% of payments within the bloc.

Visa has launched an institutional platform for asset tokenization

Spanish bank BBVA will use it to launch a pilot project on the Ethereum blockchain

Read more

The main themes of the new report are precisely the competition in the financial market between European and non-European service providers and the need for more technical services such as wallets.

The authors emphasize that payment service providers will be able to use the digital euro infrastructure to create new payment services, and the asset itself will help regional and domestic European systems to expand their payment provision.

The paper also mentions the possibility of making improvements to the user experience that will enable transactions with a level of privacy similar to cash.

Back in February, ECB executive board member Piero Cipollone promised the digital euro would offer a higher level of privacy than existing services.

BIS will start using CBDC to improve the efficiency of cross-border payments

The initiative is part of the Rialto project, implemented jointly with a number of central banks

Read more

Finally, the report mentions that the ECB will continue to select technical service providers and engage with the public and other stakeholders. The next progress report on the implementation of the digital euro will be published in Q2 2025.

The ECB Governing Council may decide to launch the asset in October 2025.