• The European Central Bank has released two reports on the institution’s market research and prototyping exercise as part of its digital euro project.
• A prototyping exercise was carried out to determine what paying with a digital euro could be like for various use cases.
• The ECB will decide in autumn 2023 whether it intends to proceed with a preparation phase to develop and test the EU’s designed central bank digital currency.
European Central Bank Investigates Digital Euro
The European Central Bank (ECB), which serves as the European Union’s central bank, is investigating the possibility of introducing a digital euro currency. As part of this investigation, the ECB has released two reports on its market research and prototyping exercise.
Market Research Invites Participants
In July 2022, the ECB invited market participants to participate in the market research in order to gain an understanding of ongoing experience and industry-specific knowledge related to building potential technical solutions for a digital euro. This research indicated that there is a large pool of European providers who are able to develop such solutions, as well as different types of architectural and technological design options available for creating a technical solution for a digital euro.
Between July 2022 and February 2023, the ECB carried out a prototyping exercise on what paying with a digital euro could be like for various use cases. This included integrating five user interfaces developed by different providers for each use case (front-end prototypes) as well as developing and testing settlement systems (back-end prototypes). Different design choices were tested in order to determine if it would be possible to integrate them into existing payment systems while still leaving room for innovations when distributing the currency.
Findings from Prototyping Exercise
The tests concluded that it is possible to integrate a digital euro into existing payment landscape systems without compromising innovation opportunities or scope for new features and technologies when distributing it. Furthermore, it seems that both online and offline solutions can be implemented using different technical designs.
The Governing Council of the ECB will decide in autumn 2023 whether they intend to proceed with developing and testing an EU designed central bank digital currency or not. Until then, further investigations are being conducted into whether an offline solution compliant with Eurosystem requirements can deliver necessary scale within short or medium term time frames using existing technologies