ECB starts project “Digital Euro”

Cryptocurrencies like Bitcoin and Ether are considered a success. Your flaw: strong fluctuations because no institution is watching over them. The European Central Bank (ECB) could jump into this gap. The ECB decided (on Wednesday) to enter into an investigation phase for 24 months, which should deal with aspects such as technology and data protection.

Now it is time to «shift up a gear and start the project of the digital euro», said ECB President Christine Lagarde.

According to the Deutscher Kreditwirtschaft (DK), umbrella organization of the five major banking associations in Germany, digital money should have three main forms:

– a digital euro for everyday use by citizens as a supplement to cash,

– a special form for the capital markets and interbank transactions as well

– So-called deposit tokens for use in industry.

FEAR OF “BANK RUNS”

The downside of a digital euro under the supervision of a central bank that ensures the stability of the currency: “Without a holding limit, balances could be withdrawn from bank accounts very quickly and exchanged for safe central bank money – so-called bank runs would be more likely,” warned currency experts such as Jörg Zeuner, chief economist of the fund provider Union Investment. An upper limit for the use of a digital euro of, for example, 3,000 euros for consumers is therefore being discussed.

Will there be a digital version of the European common currency in addition to notes and coins? And if so, when?

“EARLIEST IN 2026”

“We will (…) only decide at a later point in time whether or not a digital euro will be introduced,” said Fabio Panetta, member of the ECB’s board of directors. “In any case, a digital euro would only complement cash and not replace it.”

After the two-year investigation phase, the ECB wants to be ready to start developing a digital euro, said ECB board member Fabio Panetta. “This could take around three years.” Panetta had already said in May that a digital euro could be expected in 2026 at the earliest.

Other central banks around the world are also dealing with digital central bank money. China, for example, says it is much further ahead than the Eurosystem.