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EU delays CBDC discussions until mid-2021

Photo of: Nathan VDH
by Nathan VDH

The European Central Bank has made its report on the potential digital euro and has decided… not to decide anything. A decision on whether or not to issue a central bank digital currency (CBDC) is postponed until next year.

The report of the European Central Bank on the subject of the CBDC is now available. The working group has delivered its conclusions. However, the debate will continue within the European authorities in 2020.

Although its president, Christine Lagarde, recently stated that Europe is currently losing the global competition in payments, this is not the time for haste. A decision on whether or not to issue a digital euro is postponed until the middle of next year.

However, the ECB experts are unanimous: “the Eurosystem must be equipped to issue it in the future”. However, this does not mean issuing it at short notice, despite the lead taken in this area by other states such as China.

However, the Central Bank believes that the digital euro would promote Europe’s “strategic autonomy”. It would also provide “an alternative to foreign payment providers for fast and efficient payments in Europe and beyond. »

But despite these perceived advantages, there is no urgency nonetheless, considers the ECB. Indeed, the ECB warns that such a currency “would have profound implications for key areas of central banking, for the wider economic and financial system. »

The central bank therefore indicates that it is continuing its “further analysis”. This step should enable it “to fully understand the challenges and benefits that could result from the introduction of a digital euro. »

Several conceptions or designs are indeed possible for such a digital currency. And each scenario does not have the same advantages or disadvantages. But experts “deliberately” refuse to decide on a specific type of digital euro and draw conclusions.

The ECB report therefore focuses on “principles” and “requirements” for a digital euro potential. These include robustness, security, efficiency and privacy.

“The technical implementation of a digital euro must be thoroughly tested and legal considerations must be carefully examined before any decision to issue it is taken,” the experts conclude.

To this end, a phase of practical experimentation “is necessary”. In particular, it will aim to test the various functional designs and explore their technical feasibility. This stage should lead to the development of a “minimum viable product”.

Accordingly, the ECB working group will coordinate experiments. Only from the middle of next year, it will then decide whether to launch a digital euro project. A launch then, but no issue yet. The central bank points out that “an investigation phase would then begin. »