European Central Bank continues to develop ‘digital euro’
The European Central Bank continues with the plan for a ‘digital euro’. Over the next two years, the ECB will be working on a concept for its own crypto currency that, according to the bank, should ‘supplement, not replace’ cash. The first step is to map out the practical use.
The European Central Bank has given the green light to proceed with the project. The ECB will soon start its investigation phase. Among other things, a concept version of the coin is made, and various possible obstacles are mapped out. The investigation phase will last 24 months, the ECB says.
During that research phase, the bank wants to investigate what a possible functional design for a digital euro looks like. The bank will use focus groups, as well as create prototypes and ‘conceptual works’ of a digital version of the currency. In addition, in the investigation phase, legal frameworks are examined together with European authorities. Finally, the researchers look at ‘the possible impact of a digital euro on the market’, and at various designs in which privacy and ease of use are paramount. “The research will also define a revenue model for intermediaries within the ecosystem,” writes the ECB.
The European Central Bank has long wanted a digital currency. This should be a counterpart to cashless money, and be managed by a central authority. In January this year, the ECB opened a consultation on the plans, although it does not refer to the results in the new announcement. Experiments have also been conducted in the past on privacy, anti-money laundering, the ledger that tracks transactions, and practical use when no internet is available. ‘No technical obstacles were found’.
It is still not known what the digital euro should look like. Initially, the bank hinted that it would not use blockchain specifically, but in the new announcement it alludes to that. Blockchain could be a possible ledger, but so can the Target Instant Payment Settlement system. Both could process 40,000 transactions per second. “The experiments also show that centralized and decentralized elements can be combined,” the bank writes. According to those experiments, the infrastructure would also be environmentally friendly. “For the architectures tested, the power consumption of tens of thousands of transactions per second is negligible compared to the power consumption of cryptocurrencies such as bitcoin.”