Digital currency of the eurozone: support and next steps

The development of the digital currency of the eurozone, often referred to as the digital euro, is increasingly gaining support among eurozone member states. At the heart of this initiative is the European Central Bank (ECB), which is developing this digital currency with the aim of ensuring stability and competitiveness of the European market in the digital economy. The digital euro is designed as a solution that will provide European citizens with easier access to the safest forms of digital money while maintaining the stability of the financial system. The digital euro would be used alongside physical cash, with the advantage that it would enable fast digital transactions without dependence on external service providers or cryptocurrencies.

As part of this project, the ECB plans to integrate digital payment technology that will, along with security, allow offline functionality, a high level of privacy, and zero transaction fees. This way, the digital euro would provide as much anonymity as possible, similar to cash in physical stores, and transactions would be possible even in extreme situations such as cyberattacks or natural disasters. It is expected that this approach could help preserve the monetary sovereignty of the eurozone, especially in light of the increased acceptance of cryptocurrencies and digital currencies in the private sector around the world.

The role of banks in the implementation of the digital euro

One of the key challenges in introducing the digital euro relates to the role of banks and the stability of the financial system. The European Central Bank emphasizes that it is important for the digital euro to complement and not disrupt the existing financial ecosystem. In the context of conducting research, the ECB collaborates with commercial banks to ensure that they remain an integral part of the system and that the digital euro is implemented into existing financial flows. ECB President Christine Lagarde highlighted that the inclusion of banks is crucial, and the research phase of the project includes methods of prototyping and using focus groups to identify potential challenges and optimal solutions for banks and financial stability.

Among the challenges that the ECB is trying to address, the issue of privacy stands out. The ECB announced that the introduction of the digital euro will be accompanied by high data protection standards and user privacy guarantees. Namely, one of the main principles of the digital euro's development is to allow users' transactions to be anonymous like cash, thus preventing data misuse and ensuring trust in digital money. To this end, the ECB is working on methods for calibrating the limits of digital euro ownership, aiming to protect privacy while ensuring that the digital euro does not become a tool for money laundering or financing terrorism.

Support among eurozone member states

Support for the digital euro is growing, especially among large eurozone economies such as Germany and France. In a joint statement, the German and French ministries of finance expressed satisfaction with the development of the digital euro, emphasizing its "great potential" for European financial infrastructure. According to surveys, more than three-quarters of German companies with more than 50 employees support the introduction of the digital euro due to its potential to reduce reliance on private digital payment service providers and the risks posed by foreign and private digital currencies to the stability of the European financial market.

Implementation and testing phase

The ECB began the preparatory phase of the project in 2023, which is crucial for laying the groundwork for a potential issuance of the digital euro. In this phase, the first prototypes are being developed, and experiments are conducted to assess the impact of the digital euro on the economy and to prepare the necessary infrastructure for its integration. The implementation will include both digital solutions for online payments and technology that will enable offline transactions, ensuring ease of use without the need for additional devices.

The plan for the digital euro includes cooperation with the European Commission, finance ministers, and European parliaments. In the next two years, the ECB will work intensively on assessing the design and feasibility of the digital euro in collaboration with representatives of member states, aiming for the final version of this digital currency to be secure, reliable, and useful for all European citizens. The ECB expects that the digital euro will ensure monetary sovereignty in the long term and support economic growth and financial stability in the eurozone.