The European Central Bank (ECB) is taking a major step towards developing a digital euro. The central bank announced that it would start an investigation phase that could last up to two years. After that, it will be checked whether the project will be continued.
The ECB has been talking about the possibilities for a digital currency for some time. This should form a stable alternative to cryptocurrencies such as bitcoin. In addition, a digital euro could eventually serve as an alternative to cash. However, the ECB emphasizes that it will not become a substitute for cash.
In the research phase, the ECB will focus on issues such as how the currency can be secure yet easy to use and how it will be distributed. An e-euro must meet the needs of Europeans and help prevent illegal activities such as money laundering, but at the same time must not endanger the stability of the financial system and monetary policy, the ECB says.
Many central banks are thinking about or are already working on digital currencies. For example, China is already testing a digital yuan renminbi in some cities. The Bank of England has set up a task force to examine the possibilities for a so-called britcoin. The Federal Reserve in the United States and the Bank of Japan are also looking at the possibilities.
When the digital euro comes, it will take a few more years. The ECB previously said it would take about five years to develop such a currency. Citizens would keep the digital euro in a digital wallet. It is speculated that this would also give citizens their own account with the ECB. In order to avoid competition with the banking sector, there should be a maximum amount that can be kept in the digital wallet.