ECB releases second progress report on digital euro preparation phase

The European Central Bank (ECB) has published its second progress report on the digital euro’s preparation phase, which was launched on 1 November 2023, and is setting the groundwork for the potential issuance of a digital euro. The digital euro project is a European initiative designed to benefit millions of citizens across the euro area. Since the release of the first progress report, the ECB has updated its digital euro scheme rulebook to standardise digital euro payments across the euro area. This update follows an interim review by the Rulebook Development Group, which includes input from consumers, retailers, and payment service providers. The revised draft also incorporates contributions from seven new workstreams, launched in May 2024, focusing on key areas such as minimum user experience standards and risk management. Simultaneously, the ECB has completed a call for applications, initiated in January, to select potential providers of digital euro components and related services. The ECB has invited the selected bidders to tender, and the results will be published on the ECB’s website once finalised next year. Meanwhile, new user research and experimentation efforts have started to collect insights into user preferences and to inform decision-making. These activities will focus on specific target groups, including small merchants and vulnerable consumers, with results expected to be published in mid of next year. The ECB is partnering with key stakeholders, including merchants, payment service providers, fintech companies, and universities, to create innovation partnerships for testing conditional payments and exploring other potential use cases for a digital euro. An outcome report is anticipated to be released in July 2025. At the same time, the ECB is collaborating with experts from the national central banks of the Eurosystem and national authorities to develop a methodology for setting digital euro holding limits. This effort will help the ECB identify key factors for calibration and propose a methodology for determining these limits. The proposed method will undergo initial testing in 2025. The ECB’s Governing Council will decide on the potential issuance of a digital euro only after the relevant legislation is adopted. Last month, ECB and Norges Bank have entered into an agreement to include Norway in the TARGET Instant Payment Settlement (TIPS) service provided by the Eurosystem.