this Thursday, Fabio Panetta, Member of the Executive Committee of the European Central Bank (ECB)duet Speech In the European Parliament’s Economic and Monetary Affairs Committee, where he reported that this institution is about to start the second year of the research phase of the Central Bank Digital Currency (CBDC) project, the Digital Euro.
At the same time, Report publishedIt explains the progress made during the research phase of the Digital Euro project, detailing key design options recently approved by the European Central Bank’s Governing Council.
In fact, the details of the transfer mechanism used to validate transactions are being processed, while the Eurosystem will continue to explore a digital euro solution, where transactions take place online but will be validated by a third party.
In addition, he shows that the biggest use case for the digital euro is in-store and online business transactions. However, in his speech, Panetta made clear, without much depth, to the audience of the Parliament Committee, the points of the report.
Panetta said in his speech that after focusing on “aggregate“During March, in addition to the use cases of the digital euro and”Possibility to use offline“, they concluded that it was necessary to design a CBDC in such a way as to”Prevent its application from negatively affecting financial stability“.
After exchanging ideas with various sectors, Panetta said the ECB Governing Council was able to agree on a first set of foundational design options aimed at covering the above aspects of offline use and privacy and preventing them from having an unintended impact on financial stability in the country. Euro-zone.
The ECB’s next step is to explore options that could allow the digital euro to be able to replicate some of the cash-like features, as well as allow it to gain greater privacy in low-value transactions.
However, according to Panetta in his speech, the European Central Bank will incorporate the design of the digital euro.”hSpecific tools and rewards‘for the purpose’Avoid overuse as a form of investment“.
From this point on, the ECB will now proceed to analyzeOther design optionsWhich he did not touch on in his speech, but indicated that the overall design of a possible digital euro would be revised next year, after “They made all the decisionsRegarding the design of a CBDC.
Panetta made it emphatically clear that the fact that the Board of Directors approved this first set of design options does not mean that it can move to the implementation phase, as this decision “It will probably be taken in October next year“.
Therefore, all this study does not affect whether the ECB will ultimately decide.”Digital euro issue or notThus, the European CBD research and development schedule will continue as planned, without implying that it will be launched or not.
Panetta also noted the role of the Eurosystem and private market participants in creating the digital euro ecosystem and how the European Central Bank envisions a digital euro being distributed to European users.
The European Central Bank will now seek that the joint efforts of the public and private sectors that were central to building the current European payment system, will also build the digital euro ecosystem.
This should ensure that public funds are digitally accessible to all users and that they also have access to innovative new pan-European retail payment solutions from the private sector and financial firms.
For Panetta, there must be a balance between the presentation of the digital euro and the physical money that currently exists, so the euro system, as responsible for this balance, must avoid errors in the digital settlement of the euro.
Hence, it is essential that the Eurosystem maintains complete control over the issuance and settlement of the digital euro, so its task should be to carry out the settlement activities of the intermediaries who distribute the digital euro to the end users.
This will provide the possibility that the design of the privacy layer for the end-users of the Digital Euro will be guaranteed.”Eurosystem only processes data for the settlement of transactions without the possibility of tracking payments sent or received by a particular user“.
In Panetta’s view, this would allow, through strict data separation between intermediaries and the Eurosystem, to prevent visual data from being associated with the identity of the digital euro user, as is the case today with cash.
The Eurosystem will only implement the settlement, but will not manage end user accounts, which “It will continue to be offered and operated by private intermediaries, as is currently the case with bank accounts and services that customers are already accustomed to.“.
Panetta, in the technical department, noted that Eurosystem has not yet made a decision on whether to use traditional or distributed DLT accounting technology for settlement activities.
On the other hand, it is planned that users will be able to fund their digital euro accounts or wallets in cash, or they can simply transfer money from commercial banks, i.e. bank deposits, to digital euros, for daily use.
This will allow all users in the Eurozone the ability to convert digital Euros, either to cash or transfer funds from their digital Euro accounts to their bank account, and even be able to make and receive payments in Digital Euros.
According to Panetta in his speech to the European Parliament’s Economic and Monetary Affairs Committee, this will make it easier to make the digital euro available to people who do not currently have or have limited access to digital payments, which should improve the financing of inclusion in the eurozone.
Also, when developing a digital euro design, it is planned that this system will provide a common framework for intermediaries in the euro area to develop products and services based on the digital euro.
To achieve this, a set of common operating rules and technical standards will be established for all brokers to follow, so that they can provide digital euro solutions to end users.
This single standard will make it easier to respond to customer preferences for a simple payment solution, reduce modification costs and facilitate integration with back-end systems for merchants, who are also users of this digital euro system.
Thus, it is possible that in a year the ECB will already be able to review and analyze all the technical details of the implementation of the central bank digital currency, so it remains to be seen whether the digital euro system will actually be available before 2024 for users or the ECB. They decided it was not necessary.
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