ECB President Christine Lagarde said that the central bank is launching a two-year investigation into a digital euro as more consumers ditch banknotes and cash.
However, the actual release of the ECB-backed cryptocurrency in the bloc’s 19 members could take another two years on top of the technology design and investigation stage.
“We at ECB believe that we should be ready and have the technology available to respond to people’s demands. That’s why we are launching a two-year investigation into a digital euro. We are now starting to investigate what a digital euro might look like. This investigation phase will start in October 2021 and last for about two years,” said Lagarde.
Lagarde further explains that the project would complement the existing banking system rather than trying to ‘jeopardize’ it. She added that the experiments to consider the merits of minting a ‘digital euro’ are going through a complex decision-making process.
The ECB chief was also keen to emphasize that the Frankfurt institution has not yet decided to issue a central bank digital currency (CBDC). But if all goes well, the central bank could launch a digital currency by 2025 if European regulators give the project the green light.
The central bank said it identified two trends in global payments, one is the increasing consumer preference for digital payments, and the other is the competition to dominate payments on a global scale.
“We should respond to that demand. And make sure that we have a solution that is European based, that is secure, that is available under friendly terms, that can be used as a means of payment at reasonable terms as well and does not jeopardize the whole banking system, which should be part and parcel of the proposal,” Lagarde detailed.
The launch of a digital euro has been debated for almost three years now, but the bloc countries and their respective regulators are no closer to launching a unified cryptocurrency for their citizens.
An ECB-backed digital currency would revamp the traditional banking system like P2P transactions, machine-to-machine transactions, and better manage exchange rate and interest rate risk thanks to the programmable capabilities of crypto-like currencies.