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October 27, 2023

Digital Euro Project: Preparation Phase Underway

Spain's financial system, is joining hands with its European unveil an exciting transformation – the digital euro

Banco de España, Spain's central bank, is taking a stride alongside its European peers to introduce customers to the realm of the digital euro, a central bank digital currency (CBDC). In a demonstrative move showcasing the central bank's proactive stance, a succinct document unveiled on October 19 has illuminated the essence and potential of the European Union's imminent central bank digital currency.

Traditional physical cash, as per the central bank's perspective, lacks the capacity to fully explore the benefits of an increasingly digitized economy and society. The digital euro is envisaged to be a universally accepted mode of payment within the eurozone, on par with conventional banknotes and coins.

According to the document, the digital euro is set to play a pivotal role in the financial system, opening doors to the seamless integration of electronic payments into our daily financial transactions. This evolution promises to boost the efficiency and convenience of monetary exchanges, signifying a significant stride in the broader arena of digital finance.

In parallel, the foundational infrastructure supporting electronic payments, encompassing machines, networks, and protocols, will serve as a fundamental pillar of our financial system. The Eurosystem, in its capacity, is taking steps to ensure the reliability and availability of this critical underpinning.

Crucially, the document envisions the digital euro to be underpinned by public and European infrastructure. This strategic move is designed not only to fortify the European financial system but also to foster greater independence from foreign alternatives, laying the groundwork for financial resilience and self-sufficiency. The document also outlines the potential for the digital euro to have two modes: "offline" and "online," with privacy levels contingent on usage.

Offline payments with the digital euro would offer privacy equivalent to that of cash, while online transactions would mirror contemporary electronic payment practices. Importantly, the document clarifies that the central bank digital currency, though serving as the infrastructure provider, would not have access to individual user data in online transactions, with visibility limited to financial institutions.

The "preparation phase" of the digital euro project, which commenced on October 18, is anticipated to span over two years. During this period, the focus will be on finalizing rules for the digital currency and selecting potential issuers. However, the ultimate decision on the issuance of the pan-European CBDC remains pending.

Furthermore, the European Central Bank (ECB) has launched an information page dedicated to enlightening the public about the digital euro's potential benefits. It promises an "easier life" and a "stronger Europe," offering services such as account opening, fund loading, and payments in a user-friendly and cost-free manner. This integration aims to seamlessly become an intrinsic part of the modern financial landscape.

The Bank of Finland (BOF) is also taking the lead in developing a Finnish instant payment solution compatible with European standards. Their enthusiasm for the digital euro mirrors the sentiment across Europe's payment sector. Board member Tuomas Välimäki referred to it as "the most topical project" in European payments.

Neil Hodgson Coyle
Neil Hodgson-Coyle
Editorial chief at TechNews180
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