The digital euro is not expected to launch until 2028 or 2029, according to Germany’s central bank president, Dr. Joachim Nagel. The European Central Bank (ECB) initiated a two-year preparation phase for the project late last year to finalize rules, select private-sector partners, and conduct testing and experimentation. After this period, the Governing Council will determine whether to proceed to the next stage of preparations, laying the groundwork for potential future issuance. However, the final decision can only be made after the European legislative process ends.
The digital euro is envisioned as a central bank digital currency (CBDC), backed by a central bank and aimed at improving the capabilities and accessibility of central bank money. Dr. Nagel emphasized the advantages of a European payment method, highlighting that it will be secure, convenient, fast, reliable, free, and accepted across the eurozone. Currently, German bank cards may not function in other euro area nations, but the digital euro could facilitate various transactions such as online purchases, in-store transactions, and payments to public authorities, especially if it becomes legally recognized as tender.
Critics of the digital euro argue that it could reduce the money held by banks and raise concerns about privacy. Additionally, some worry that it may not offer significant improvements over existing payment options and could potentially cause problems for banks during financial crises. In response to these doubts, the ECB asserts that a digital euro would introduce competition in the payments sector, currently dominated by American companies. To address worries about impacting banks, the ECB plans to limit the amount any one person can hold to around 3,000 euros.
The Governing Council’s final decision on the digital euro can only be made after the European legislative process concludes. Dr. Nagel believes that it may take an additional four to five years before the digital euro is actually implemented. The ECB’s preparation phase includes finalizing rules, selecting private-sector partners, and conducting testing and experimentation to ensure a successful launch. The digital euro is expected to be accessible through existing online banking apps provided by banks or a digital euro app on smartphones with baseline functionalities provided by the Eurosystem.
Overall, the digital euro aims to unify payments across the eurozone, providing a secure, efficient, and widely accepted payment method for individuals and businesses. While there are concerns and criticisms surrounding the implementation of a digital euro, the ECB is committed to addressing these issues and believes that it will create competition in the payments sector while ensuring a smooth transition for financial institutions and users. The timeline for the launch of the digital euro is dependent on various factors, including the completion of the preparation phase and the approval of the European legislative process.
