DEA statement regarding the announcement of the ECB on proceeding to the next phase of the digital euro project

The Digital Euro Association (DEA) welcomes the decision by the European Central Bank (ECB) to take further steps in preparation for potentially introducing a digital euro. On October 18th, the ECB officially announced its plan to advance to the next phase of the digital euro project - the preparation phase, set to commence on November 1, 2023, and with an initial duration of two years.

If designed properly, the digital euro can be a key driver for future financial services in the European Union (EU) both as a complement to euro banknotes and coins and as a catalyst for innovation and competition in the EU. It can contribute to a more efficient, secure and resilient financial system, which is vital for a prospering economy and society.

However, it is important to note that the published results of the preparation phase of a digital euro come with challenges that need to be addressed:

Providing Clarity around the Digital Euro's Value Proposition

It is imperative that the ECB articulates compelling value propositions for the digital euro, emphasizing its general benefits, also for citizens. While it is stated in the summary report on the preparation phase that “a digital euro would bring tangible benefits for end users”, these “tangible benefits” are not yet clear. 

“The ECB mentions that a digital euro would address a market gap by providing a means of payment that is widely accepted, free for basic use, inclusive, secure, can operate offline and offers the highest possible protection of privacy. These features, however, are not sufficient to drive large-scale adoption - in particular, with a digital euro that has a relatively low account limit,” says Dr. Jonas Gross, Chairman of the DEA. 

"In times of economic and political uncertainty, clear communication, accountable actions and a focus on financial and monetary stability by the ECB are pivotal for maintaining trust in democratic institutions," states Valentin Seehausen, Board Member of the DEA.

Clarifying Use Cases for the Digital Euro

Precision in defining use cases is important. This not only aids individuals and businesses in comprehending practical applications but also creates confidence in the digital euro's adaptability as a versatile digital currency. A well-articulated array of use cases stands as a vital factor in realizing the digital euro's full potential and ensuring its seamless integration within the current financial ecosystem.

Enhancing Understanding of the Digital Euro's Macroeconomic Impact

The primary objective of the ECB is to ensure price stability in Europe. How a CBDC integrates with current forms of money to achieve price stability needs sorrow investigation and practical experience. Additional to that, a potential impact on financial stability, transaction cost reduction, and increased competition within the payment sector should be examined.

We encourage the ECB to take a leading role in creating research results. This will allow citizens and businesses to take an informed stance toward a digital euro. It will also ensure that the European Parliament and the European Commission can make an informed decision. We welcome all research already conducted by the ECB, the BIS and other institutes.

Early, Transparent and Educational Communication to the Citizen

The above mentioned points should be communicated early and clearly to citizens, merchants, and financial institutions. This also ensures that current criticism, namely that a CBDC is a surveillance instrument, will be addressed.

The current nomenclature, 'Digital Euro,' bears a resemblance to existing digital payment methods, rendering it challenging for citizens to understand it is actually a CBDC. To address this, we recommend conducting user research to identify a more distinctive and informative name.

A transparent communication should also comprise transparent comparisons between the different forms of money. This includes honest evaluation of benefits and drawbacks of the current monetary system based on fractional-reserve banking and the newly created retail CBDC as a new form of money.

Accelerating the actual Digital Euro Launch Decision for Timely Implementation

A swift decision regarding the digital euro is paramount, as we firmly believe it can expedite the implementation process by reinvigorating prioritization strategies, thereby increasing the likelihood of adhering to the initial 2026/2027 timeline. The current schedule may prove challenging to meet without prompt action.

The digital euro, set to become legal tender, will necessitate companies and merchants, not exempt from the requirement, to seamlessly integrate and accept it. Experience from past payment system initiatives demonstrates that such preparations entail several years. To establish a robust network around the digital euro, it is imperative to make the launch decision at the earliest possible juncture. This affords businesses and merchants the necessary lead time to adapt their internal and external processes, incorporating the digital euro as an additional payment method.

We encourage the ECB to explore both open-source and proprietary technology, engage in pilot projects, and foster public-private partnerships. The rapid pace of innovation within the payment and currency landscape over the last decade underscores that progress is unstoppable. The ECB is urged to embrace this velocity and respond to the demands of businesses and citizens, ensuring that innovation unfolds within a democratic and equitable framework.

Conclusion: The DEA is the citizens’ voice and the ECB’s ally

“We encourage the ECB to embrace a more progressive and courageous approach. The fast-evolving landscape of digital money and financial technology demands swift adaptation and innovation. By taking bolder steps, the ECB can stay ahead of the curve, ensuring it remains a leading force in the global financial arena and effectively addresses the challenges of the digital era.”, says Anne-Sophie Gógl, Board Member of the DEA.

We wholeheartedly extend our support to the ECB and simultaneously urge for enhanced collaboration with associations like ours. It is imperative for the ECB to work closely with industry representatives and experts to harness collective knowledge and drive innovation, ultimately shaping a more dynamic and responsive financial ecosystem.