European Central Bank and Eesti Pank reveal possibilities for digital euro

By Joy Dumasia

Eesti Pank carried out a research project into the technical possibilities for a digital euro alongside the European Central Bank and seven other central banks of the euro area. The experiment established that a novel blockchain-based solution could, in theory, support almost unlimited numbers of payments being processed simultaneously with an enormous money supply and with a smaller carbon footprint than the card payment system.

Eesti Pank worked with the European Central Bank and the central banks of Spain, Germany, Italy, Greece, Ireland, Latvia and the Netherlands to assess one possible technical solution for the digital euro.

The Governing Council of the European Central Bank has not yet decided on introducing a digital euro. Still, it settled on 14 July to move forward with the preparations needed for introducing one. The Governing Council will decide whether or not to raise the digital euro and what technology it should be based on later.

If the digital euro is introduced, it would not replace cash but would provide an alternative alongside money for all people and companies. Like it does for money, the central bank would guarantee the value of the digital euro. Introducing the digital euro would further the digitalisation of the economy and lead to programmable cash and reduce the cost of making payments.

The experiment provides an input to the Project Investigation Phase on the digital euro, which started in the middle of July. This phase will see various user surveys and will bring in banks and other payment service providers to look more deeply into the options for issuing digital euros.

Recently, IBS Intelligence reported that the European Central Bank (ECB) decided to launch the investigation phase of a digital euro project today. Following the decision, the President of the Eurogroup Paschal Donohoe joined the meeting, congratulated the Governing Council and expressed his full support for the project.