The digital euro and its impact on the current financial system: An overview
![](data:image/svg+xml;utf-8,<svg xmlns="http://www.w3.org/2000/svg" width="370" height="246" />)
investigation in October 2021 to explore digital euro possibilities, examining its distribution and impact on the economy and society. Progress reports were subsequently published, including:
First progress report on the digital euro investigation phase
The report highlighted approved design options and progress in the digital euro project’s inquiry phase endorsed by the ECB’s Governing Council. Investigations included peer-to-peer and third-party validation for payments, privacy enhancements and measures to prevent excessive investment use.
Second progress report on the digital euro investigation phase
The second report outlined extensive engagement with stakeholders, clarifying roles for supervised intermediaries in distributing and managing the digital euro. The design aimed to limit Eurosystem involvement in user data processing while ensuring controlled issuance and settlement.
As per the report, supervised intermediaries would handle user-facing operations, account management, compliance checks, and conversions to and from digital euros. Users would retain the choice of converting bank money or cash to digital euros.
Third progress report on the digital euro investigation phase
The third report detailed that the European Commission planned to propose a digital euro regulation in the second quarter of 2023. The Eurosystem was prepared for necessary design adjustments, aiming for a timely launch upon legal adoption.
It outlined access, holdings, onboarding and distribution aspects for euro area residents, merchants and governments initially, expanding to non-resident citizens and broader European Economic Area consumers later. Holding limits for individuals, zero-holding limits for merchants and governments, and smooth payment mechanisms were also proposed.
Fourth progress report on the digital euro investigation phase
The fourth report outlined the Eurosystem’s principles for a digital euro compensation model, covering ongoing work, prototyping results and market research in Q2 of 2023. It emphasizes free basic services for citizens and fair compensation for intermediaries.
Additionally, the Rulebook Development Group progressed on use cases, user journeys, scheme compatibility, identification and infrastructure requirements for the digital euro. The European Commission’s draft regulation supports a digital euro framework and strengthens the legal status of euro cash, with the ECB ready to offer technical support.
Status of the digital euro in November 2023
The ECB’s Governing Council approved the digital euro project’s transition to the preparation phase on Oct. 18, 2023. Starting on Nov. 1, 2023, this two-year phase aims to finalize rules, select development providers and test the digital euro’s functionalities. It prioritizes meeting Eurosystem requirements and user needs, emphasizing aspects like user experience, privacy, financial inclusion and sustainability.
2 comments