By Ed Frankl
A potential digital currency in the eurozone is a little closer, after the European Central Bank said it is moving to the next stage of laying the groundwork for a digital euro.
The new phase, which comes after a two-year investigation exploring the design and distribution of digital euro, will include a finalizing a rulebook and selecting providers to develop platform infrastructure, the ECB said Wednesday.
A central bank digital currency, or CBDC, could be used for all digital payments throughout the euro area, the central bank said.
As cash use declined in recent years and cryptocurrencies such as Bitcoin rose in popularity, many countries have looked into creating a digital version of their currencies. In principle, digital spending money would be directly created by the central bank, rather than commercial banks.
China has rolled out a digital yuan since it started piloting one in 2020, and CBDCs are in use in India and Nigeria. The U.S. Federal Reserve also said it was exploring the benefits and risks of a digital dollar but hasn't made a decision.
"It could be used from person to person, at the point of sale, in e-commerce and in government transactions. No digital payment instrument offers all these features. The digital euro would fill that gap," the ECB said in a statement.
The new phase begins on Nov. 1, initially for two years, including testing so the new CBDC meets the EU's requirements and user needs including privacy, financial inclusion and environmental footprint, it said.
Users would be able to access digital euro services via a payment-service provider's app or via a digital euro app provided by the Eurosystem, the eurozone's monetary authority.
After this next two-year phase, the ECB's governing council will decide whether to move forward including the issuance and final rollout of a digital euro, it said.
"We need to prepare our currency for the future...It would coexist alongside physical cash, which will always be available, leaving no one behind," ECB President Christine Lagarde said.
Write to Ed Frankl at edward.frankl@wsj.com
(END) Dow Jones Newswires
10-18-23 1208ET
