ECB Says Payments Landscape Has Room for Digital Euro

The European Central Bank (ECB) has done recent tests that show the potential of a digital euro.

The bank released results of a “prototyping exercise” — conducted between July 2022 and February — that examined what digital euro payments would look like in a variety of use cases, according to a Friday (May 26) press release.

“This exercise shows that it is possible to smoothly integrate the digital euro design choices into the existing payment landscape while leaving ample scope for innovative features and technologies,” ECB Executive Board member Fabio Panetta wrote in a letter to Irene Tinagli of the European Parliament. “The findings also show that a digital euro, using independent designs, could theoretically work both online and offline.”

In addition, the ECB conducted market research to get a handle on “the industry-specific knowledge and the ongoing experience of building potential technical solutions for a digital euro,” and found that there is “a sufficiently large pool of European providers that are able to develop digital euro solutions,” according to the release.

The bank said in the release the market research also indicates there are a variety of available architectural and technological design options to craft “a technical solution for a digital euro.”

Nevertheless, central banks will still need to mount a strong argument for a new digital currency at a time when consumers’ needs are being met via traditional payments channels, Alexandre Maymat, head of global transaction and payment services at Société Générale, said in an interview with PYMNTS earlier this month.

Some Europeans “use cash not because they’re unbanked but because they live in a digital desert,” he told PYMNTS. “So, to put in place a digital currency aimed at solving the issues of citizens who are not digitally savvy is probably not the best way to reduce [the use of] cash.”

PYMNTS also explored the future of central bank digital currencies (CBDCs) in a conversation with James Wallis, vice president of central bank engagements at Ripple, who noted that the digital wallets that end-users will hold for using CBDCs will “come from financial services providers,” many of whom have started to “become a part of the conversation” around digital currencies.