The European Central Bank (ECB) has laid out a series of design and distribution options for a digital euro that describe how the Eurosystem and supervised intermediaries such as commercial banks would operate in order to issue, distribute and settle transactions made using the proposed central bank digital currency (CBDC).

The ECB’s second progress report on the two-year investigation phase of its digital euro project outlines key responsibilities for supervised intermediaries, including the onboarding of end-users, anti-money laundering checks and consumer-facing services such as payment initiation solutions in order to “minimise Eurosystem involvement in the processing of user data”.

It also defines which institutions will be responsible for settling on- and offline transactions conducted in the digital currency, how end-users will be able to convert cash and funds held in their bank accounts into digital euro, and how the system will guarantee that “all euro area citizens can pay and be paid in digital euro”.

“The Eurosystem would not be able to infer how much digital euro any individual end user holds nor to infer end users’ payment patterns,” the ECB says.

Next steps

The ECB’s report also reveals its plans for the remainder of the investigative phase with the aim of presenting an overall design proposal to its governing body in the second half of this year.

“In the remainder of the investigation phase, work will continue on assessing a number of design and distribution options for a digital euro, including advanced functionalities for digital euro payments (programmable payments, cross-currency payments) and additional aspects of the digital euro distribution model,” the ECB says.

“The latter include matters relating to supervised intermediaries and scheme access criteria, form factor and how end-users could access the digital euro customer interface, core services and value-added services, end-user onboarding, digital euro access and holdings, and issuance and redemption.

“In the second half of 2023 the overall digital euro high-level design will be presented for approval to the ECB’s decision-making bodies.

“The investigation phase also includes a prototyping exercise to test how well potential back-end solutions developed by the Eurosystem could be integrated with front-end prototypes. The prototyping exercise is expected to be completed in the first quarter of 2023, when the ECB will also publish its findings.”

“The ECB continues to exchange views and actively engage with a broad range of stakeholders, including at political level, as well as market participants and society at large,” the central bank adds.

The ECB launched the two-year investigation phase of its digital euro project in July 2021 and revealed plans to trial five prototype digital euro payment solutions across key use cases in September 2022.

The Eurosystem, which comprises the European Central Bank and the national central banks of the Member States whose currency is the euro, is the monetary authority of the euro area.

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