The European Central Bank took a first step today towards launching a digital version of the euro, part of a global drive to meet growing demand for electronic means of payment and tackle a boom in cryptocurrencies.
An electronic equivalent of banknotes and coins, the digital euro will likely be a digital wallet that euro zone citizens can keep at the ECB rather than a commercial bank.
The ECB's Governing Council today formally gave the go-ahead to the investigation phase of the project, which should last 24 months and be followed by three years of implementation.
The main aim of the initiative is to avoid leaving digital payments to the private sector, particularly if the use of physical cash starts dwindling, like it has in Sweden.
"Our work aims to ensure that in the digital age citizens and firms continue to have access to the safest form of money, central bank money," ECB President Christine Lagarde said.
The ECB will now start working on the design of the digital euro, consulting with stakeholders ranging from banks to retailers.
It will also start talks with European Union lawmakers to seek legislative changes that may be needed because the digital euro was not foreseen by EU Treaties.
"A discussion by the end of this year on policy objectives and uses of a digital euro - also taking into account the global context - could be a good starting point," ECB board member Fabio Panetta said.
The ECB will now also define the role for banks and fin techs, which will probably offer digital euro wallets to customers on the ECB's behalf.
Commercial lenders have already ramped up efforts to influence policy and technical plans to secure a slice of the market.
The ECB already conducted experiments in the past year, finding "no major technical obstacles" with the digital euro's ledger, its privacy and safety and offline use.
Work on a digital euro accelerated after Facebook unveiled plans to create its own currency in 2019, a potential threat to central banks' core business.