Digital Euro Project: Current Status and Future Directions
The Eurosystem’s digital euro project is designed to provide central bank money in digital form to the public, aligning with the increasing shift towards electronic payments in an evolving e-commerce landscape. This initiative aims to replicate the trusted features of physical banknotes in the digital world, while reducing Europe’s reliance on international card networks and non-European payment providers. The digital euro is envisioned as a safe, free, and user-friendly alternative to cash, facilitating electronic payments across the euro area, benefiting consumers, merchants, and payment service providers (PSPs). It is expected to foster innovation, boost competition in the European payments sector, and strengthen the region’s monetary sovereignty.
On November 1, 2023, the project entered a two-year preparation phase, focused on laying the foundation for a potential digital euro launch. Key objectives during this phase include finalizing the digital euro scheme’s rulebook, selecting providers for the infrastructure, and conducting user research and consultations to ensure the digital euro meets the highest standards of quality, security, and usability. The decision to proceed with issuing a digital euro will be made by the Governing Council after the European Union’s legislative framework is established.
Progress from May to October 2024
During the first quarter of 2024, the Digital Euro Scheme’s Rulebook Development Group (RDG) completed its review of the initial draft (version 0.8) of the rulebook. The review incorporated approximately 2,500 comments from stakeholders. By May 2024, seven new RDG workstreams were launched, focusing on critical areas such as user experience standards, risk management, and implementation specifications. The revised rulebook, expected to be finalized during the preparation phase, will ensure that the digital euro is accepted across the euro area and can adapt to future legislative developments.
Efforts have also progressed in selecting providers for the Digital Euro Service Platform (DESP). A tender invitation for external components was issued, and offers are under evaluation. Furthermore, experimentation and user research activities began in September 2024, with the aim of gathering insights on user preferences. Innovation partnerships to test conditional payments and other use cases were announced, with results expected in mid-2025.
Design Developments and Stakeholder Engagement
Significant strides have been made in the design of the digital euro, particularly concerning the calibration of its holding limit and offline deployment options. Discussions in July 2024 with the Euro Retail Payments Board (ERPB) helped shape the digital euro’s holding limit, ensuring it balances user needs with financial stability. Additionally, technical talks in October 2024 explored options for deploying an offline digital euro solution on mobile devices.
Engagement with stakeholders, including market participants, policymakers, and the public, remains a cornerstone of the digital euro project. Regular consultations with the banking sector, merchants, and consumers ensure the digital euro meets the needs of all involved parties. Technical sessions with the ERPB have focused on the digital euro’s role in the European payments ecosystem and its potential to reduce dependence on non-European payment providers. Public communication efforts have also been ramped up to raise awareness about the digital euro’s benefits and its potential impact on European consumers and merchants.
Key Areas of Development and Next Steps
Digital Euro Scheme Rulebook
The digital euro rulebook is being refined based on extensive feedback from various stakeholders. In 2024, the RDG focused on refining the draft rulebook and developing new sections. Workstreams have addressed issues such as user experience standards, certification, risk management, and the calibration of the digital euro’s holding limit. These sections will guide PSPs in creating consistent and secure user experiences.
User Research and Experimentation
User research, which began in September 2024, is essential for understanding the preferences and needs of potential digital euro users. This includes a segmentation analysis, studies on holding limits, and research with vulnerable groups. In addition, technical experimentation with market participants is helping to explore innovative use cases for the digital euro, particularly in B2B payments. These activities will continue throughout 2025, with an outcome report expected in mid-2025.
Holding Limit and Offline Digital Euro
The methodology for setting the digital euro’s holding limit is being developed in collaboration with various stakeholders. Discussions focus on ensuring the holding limit supports user needs while maintaining financial stability. Additionally, efforts to deploy an offline digital euro solution on mobile devices are progressing, with technical talks aimed at integrating this feature into existing payment systems.
External Stakeholder Engagement
Engagement with external stakeholders, including European payment schemes and international central banks, continues to ensure the digital euro fits seamlessly into the European payments ecosystem. Ongoing discussions with co-legislators help inform the legislative process, particularly regarding privacy protections and the integration of the digital euro into Europe’s broader financial infrastructure.