The ECB is analyzing possible use cases for the digital euro.
After conducting a market study and prototyping exercise for the digital euro, the European Central Bank has published the fourth report about the progress it has made in the development of this central bank digital currency (CBDC).
In this new report, the ECB explained that the digital euro will be designed as an alternative to improve p2p payments and to facilitate e-commerce operations, at least, in its first phase. The ECB noted that, although these are simple use cases, these will allow people to become familiar with this new form of money, giving room for broader acceptance among the population and for shops and businesses to improve their infrastructure. payment system, in order to facilitate the future integration of digital currency in retail payments.
The European Central Bank also highlighted financial inclusion as a key to development of the euro zone, so in the design of the digital euro the needs of all citizens are being considered, including older adults and people with limitations or disabilities. According to the bank, the digital euro must be suitable for all citizens.
On the other hand, the security and financial stability needs of the region are considered, ranging from the portability of the digital currency to preventing fraud in payments with the digital euro, among others.
Despite evaluating the possible use cases of the digital euro, the ECB has not yet made a decision on whether or not to develop this CBDC digital currency. In its report, the central bank indicated that this decision will be made in the fall by its Governing Council, which is the main decision-making body of the ECB and responsible for formulating the monetary policies that govern the euro zone.
Progress in the development of the digital euro
The ECB, together with several European institutions that support the creation of a CBDC, gave start of a research phase focused on evaluating the advantages, risks and viability of the digital euro in 2021. During this research phase, other aspects have also been considered, such as the management and distribution of the digital currency, as well as citizens' preferences in financial matters.
Since then, the collaboration of institutions and other interested parties in the development of a digital euro has been key to driving new advances on the CBDC, such as a regular dialogue on the possibility of creating this digital currency and the development of prototype cases. use and market studies that ended in the second quarter of this year. At the end of 2022, the ECB called on institutions to present possible use cases for the digital euro, such as programmable payment services in the retail sector.
The entity has also established part of the objectives on which the digital euro will focus if it is issued. For example, ECB President Christine Lagarde said in April that issuing a CBDC will help the entity monitor payments of citizens behind the excuse of improving the efficiency of transactions and mitigating the risk of illicit activities. In an alleged conversation with the president of Ukraine, Volodymyr Zelensky, Lagarde pointed out that the digital euro could serve as a tool that allows the government to control the financial affairs of its citizens.
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