LONDON—The European Central Bank announced Wednesday that it’s starting work toward creating a digital euro currency as more consumers ditch cash.
The project is expected to take two years and the idea is to design a digital version of the single currency, used in the 19 members of the euro zone. However, the actual implementation of the central bank backed currency could take another two years on top of the design and investigation stage.
“It has been nine months since we published our report on a digital euro. In that time, we have carried out further analysis, sought input from citizens and professionals, and conducted some experiments, with encouraging results. All of this has led us to decide to move up a gear and start the digital euro project,” ECB President Christine Lagarde said in a statement.
“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,” she added.
Lagarde had forecast in March a timeline of at least four years for full implementation. In an interview with Bloomberg News, Lagarde said that this was a technical endeavor and that “we need to make sure we do it right.”
The digital euro would allow consumers to pay electronically, without the need for banknotes and coins. However, it would “complement” the existing monetary system rather than replacing physical cash and erasing the business of commercial lenders.
“We are entering the age of digital money,” Fabio Panetta, a member of the executive board of the ECB, said in a blogpost Wednesday.
“Private solutions for digital and online payments bring important benefits such as convenience, speed and efficiency. But they also pose risks in terms of privacy, safety and accessibility. And they can be expensive for some users,” Panetta said.
Discussions over a digital euro emerged in the wake of plans from Facebook to have its own currency. However, the talks somewhat accelerated with the pandemic as more people began to buy goods online.
“The coronavirus pandemic has shown just how fast such change can happen. And this is affecting the way we pay. We are increasingly buying digitally and online. The role of cash as a means of payment is declining,” Panetta added.
