The European Union is taking steps forward for its digital euro, discussing some proposals and starting market research. However, some actions may require political support.
The European Union has offered an update on the digital euro, its much-discussed central bank digital currency (CBDC).
EU finance ministers talked about recent proposals on a digital euro and on January 16, members adopted a statement on CBDCs. Some features and design choices require political approval, he said.
The report of the meeting provides some more details about the group’s opinion on the digital euro. It notes that digital payments are becoming increasingly popular but cash payments remain important for many countries in the region.
In terms of motivations for why a CBDC might be necessary, the report states that it would be “a monetary anchor that would keep public access to central bank money in a digital world by being widely accessible to potential users”. ” It would also benefit strategic autonomy, as the EU sees it as a means of increasing independence from non-European payment solutions.
Privacy is an often discussed issue related to CBDCs, but the report confirms that the European Central Bank (ECB) will not have information about holdings, transaction history or payment patterns. It also stresses that the digital euro is “not about programmable money.”
ECB takes the path of the European Union
The ECB also published a market research post on Technical Solutions for the Digital Euro. Here he invited market participants to participate in market research to better understand the technical design of CBDCs.
IR provided an outline of a possible design for a digital euro for the sole purpose of market research. The stakeholders in the system are consumers, intermediaries such as financial institutions and the ECB and central banks in the region.
The end-to-end flow of the design looks at various aspects expected of a CBDC. The consumer places an onboarding request with intermediaries, who capture the data and conduct KYC checks. Once done, they issue the wallet to the consumer. At the other end, the Digital Euro component (overseeing the overall process) checks whether the user already has the wallet and confirms the settlement.
Bank of England governor not swayed by CBDC
CBDCs are being rolled out in various parts of the world, including India, China, Japan and Sweden. However, it does not appear that all central banks are convinced that they are necessary.
Andrew Bailey, governor of the Bank of England, was skeptical about the digital pound, saying he was not sure if it was necessary. “Before we get carried away with the technology and the idea, we need to be clear about what problem we are trying to solve here,” he said, adding that England has generally taken a position with digital assets.
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