The ECB has kicked off a phase of work aimed at introducing the digital euro to counter the growing rise of cryptocurrencies. This 2-year pilot project will determine the contours and operation of this future virtual means of payment. Here's how it works.
Towards a safer form of currency
The President of the ECB, Christine Lagarde, has announced the launch of a 2-year investigation phase for the digital euro project, during which the functions and technical details of this electronic currency for retail customers will be defined.
Several factors prompted the company to launch this project. Firstly, the rise of online shopping and contactless payment. Cash is used less and less. While this new form of electronic money should meet the needs of Europeans, it will also help prevent illegal activities and their undesirable effects on financial stability and monetary policy.
In ecological terms, the digital euro will be different from bitcoin, because according to the ECB, the energy required for the infrastructure it uses is "negligible compared to the energy consumption and environmental footprint of cryptoactives such as bitcoin".
In a press release issued after a Governing Council meeting in Frankfurt, the ECB states that the aim is to offer "the safest form of money".
With the digital euro, consumers could pay for their shopping online or via a mobile app, or offline with the help of payment cards similar to debit cards.
Virtual currency: other experiments underway
The European Central Bank is not the only one to have embarked on such a project. Since March, China has been testing a digital version of its official currency, the e-yuan, with the aim of turning it into an international currency. The arrival of the virtual currency is scheduled for February 2022, during the Beijing Winter Olympics.
For its part, in 2019, Facebook had also announced the launch of its virtual currency project, Diem(ex-Libra), with the aim of "developing a simple global currency and financial infrastructure to serve billions of people", the white paper states. Although the project has lost some of its momentum, particularly in the face of shields raised by global states and regulators, it should finally see the light of day this year, at the same time as Facebook's virtual wallet, which is supposed to enable users to better manage their diems.
As for thedigital euro project,its actual launch is scheduled for around 2025-2026. The announcement was welcomed by Paris and Berlin, who nonetheless made the creation of a digital version of the euro conditional on a "political decision" by the 19 eurozone member states, and called on them to be closely involved in the work ahead.