ECB Moves to Start Digital Euro Project

The European Central Bank (ECB) said it will move from discussion to exploration in its plans to develop a digital euro.

• The ECB decided to start the investigation phase of a eurozone central bank digital currency (CBDC), which will last 24 months, an announcement Wednesday said.
• The ECB has been discussing the potential launch of a CBDC for the 19 euro countries since the beginning of this year. ECB President Christine Lagarde said in March that one could be launched within four years.
• "We will commit the resources necessary to design a marketable product," ECB board member Fabio Panetta said in a blog post on Wednesday. "But a decision about whether or not to issue a digital euro will only come at a later stage. And in any event, a digital euro would complement cash, not replace it."
• Research by the central bank last year highlighted a drop in the use of cash since 2019, with the COVID-19 pandemic accelerating in the long-term decline.
• The ECB said prior experimentation suggested that an architecture "combining centralized and decentralized elements are possible."
• The move from discussion to exploration of a CBDC is one that numerous other central banks including those of the U.K. and Japan have made in the past year.
• Among major economies, China leads the way in CBDC plans, while South Korea and Sweden both appear to have moved from exploration to testing in recent months.