A report has been published by European Central Bank (ECB) which sheds light on ECB’s progress in the ‘Digital Euro’ project.
It was more than a year ago when ECB took up the project of Digital Euro on the pretext that it would benefit the region. Thereafter, ECB assured on several occasions that the project is almost finished.
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However, the central bank had to face several challenges pertaining to the blockchain network.
The technology may sound easy given the number of projects that have been launched but it does not a lot of hard work.
So far, several blockchain networks have been launched but hardly a handful of projects have made it through the difficult times.
Many blockchain projects are quite vulnerable to external attacks so the ECB had to make sure it had this segment covered.
It was further apprised several times that the launch of Digital Euro will take place in 2023. However, it seems that ECB’s commitment regarding Digital Euro’s launch in 2023 has been deferred.
ECB’s recent publication is in actual fact the second report on the progress of the Digital Euro Project. This report highlights and talks about some of the key areas of the project, including project designs, circulation process, etc.
ECB Report Describes Key Aspects of Digital Euro Project
The report also describes functions, duties, and obligations on the part of ECP as well as pilot testing market participants.
ECB explained that Digital Euro would similarly be a ‘liability’ as in the case of Euro currency within the Eurosystem’s balance sheets. (Eurosystem comprises of ECB as well as the central banks of each member state)
It was suggested by ECB that each monetary authority within each EU member state shall be represented by ECB for the project.
Process Describing the Distribution of Digital Euro
The report further outlined the distribution process of the Digital Euro. The process describes that it shall be the responsibility of the intermediaries to provide end users with Digital Euros.
Intermediaries include payment service facilitation and credit institutions while the end users include the general public, retailers, vendors, and merchants.
As part of their roles, intermediaries would enable end users in obtaining digital wallets for processing their Digital Euro transactions.
Transactions Shall Go Through KYC and AML Standards’ Checks
Each transaction of Digital Euro shall be subject to global policy standards i.e. Know Your Customer (KYC) and Anti-Money Laundering (AML).
ECB stressed that it shall provide a mechanism in which whether the transaction is in Euro banknotes or Digital Euro, both shall be acceptable.
Equal Rights and Freedom
It further explained that each participating entity, irrespective of its regional nationality, shall be treated equally and shall have equal rights. Similarly, the same principle shall apply to the end users and Digital Euro wallet holders.
ECB has committed that Digital Euro’s design would be such that it would enable users to process transactions by supplying minimal data.
For instance, the end users would have the liberty to transact whatever amount they wish to process. There shall be no limit or capping of the Digital Euro.
Similarly, the wallet holder shall not be required to hold any specific amount of Digital Euros in the wallet, explained ECB.
No Timelines were given for the Launch
Although ECB’s recent publication does talk about Digital Euro’s layout plan, it does not speak about its launch.
Originally the plan was to first carry out pilot testing at the end of 2022 or at the beginning of 2023.
However, ECB’s report suggests that the launch of the Digital Euro has been postponed without specifying any date.
What it speaks of is that additional research is needed particularly regarding the distribution process which ECB shall begin by January 2023.
No further timelines have been provided in the report. Hence, there is a big question mark whether Digital Euro shall be made available to end users in or after 2023.