The European Central Bank (ECB) has released its first progress report on the digital euro preparation phase, with a focus on design aspects and expected next steps.
Since the preparation phase launched in November 2023, the ECB has determined the technical features required to give the online digital euro higher transaction privacy standards than those of current digital payment solutions while protecting the end-user from fraud. Pseudonymisation, hashing and data encryption will be employed, the bank stated, with payment service providers only granted access to personal data required for EU law compliance.
The digital euro will also include an offline functionality, the ECB added, allowing for a “cash-like level of privacy” for personal transactions. In these cases, transaction details would only be available to the payer and payee.
This offline functionality would also allow for payments to be made without internet connection. Technical work in this space has focused on anti-money laundering practices and forgery checks in an offline environment.
Individuals’ digital euro holdings would be limited, the ECB continued, and would not be remunerated. A calibration methodology to determine the holding limits is currently in development, with exact details to be released closer to the time of issuance.
Five calls for application have been issued by the ECB to establish framework agreements with external providers for the provision of digital euro components and related services. The highest ranked respondents will be invited to tender, with the process contributing to the final technical details of the digital euro design.
Alongside this, a digital euro rulebook is expected to be released by the digital euro Rulebook Development Group by the end of 2024.
Commenting on the report, Piero Cipollone, executive board member and chair of the digital euro high-level task force, said: “The digital euro preparation phase is progressing well and we support the ongoing democratic debate on the legal framework for the digital euro.
“The digital euro is a common European endeavour. As such, we will continue engaging with all stakeholders, including the European public, to ensure that it is successful and benefits us all.”
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