The governing council of the European Central Bank (ECB) has launched the investigation phase of a digital euro project.

The investigation will last 24 months and aim to address key issues regarding design and distribution.

The ECB said that a digital euro must be able to meet the needs of Europeans while at the same time helping to prevent illicit activities and avoiding any undesirable impact on financial stability and monetary policy. This, it explained, will not prejudge any future decision on the possible issuance of a digital euro, which will come only later.

The central bank said that in any event, a digital euro would complement cash, not replace it.

“We will engage with the European Parliament and other European decision-makers and inform them regularly about our findings,” said says ECB board member Fabio Panetta, chair of the high-level task force on a digital euro. “Citizens, merchants and the payments industry will also be involved.”

During the investigation, the organisation plans to focus on a possible functional design that is based on users’ needs.

It will involve focus groups, prototyping and conceptual work.

The probe will examine the use cases that a digital euro should provide as a matter of priority to meet its objectives: “a riskless, accessible, and efficient form of digital central bank money.”

The project will also shed light on the changes to the EU legislative framework which might be needed and that will be discussed with, and decided by, European co-legislators.

The ECB will continue to engage with the European Parliament and other European policymakers throughout the project’s investigation phase. The technical work on the digital euro with the European Commission will also be intensified.

Finally, the investigation phase will assess the possible impact of a digital euro on the market, identifying the design options to ensure privacy and avoid risks for euro area citizens, intermediaries and the overall economy. It will also define a business model for supervised intermediaries within the digital euro ecosystem.

A market advisory group will take account of prospective users’ and distributors’ views of a digital euro during the investigation phase. Those views will also be discussed by the Euro Retail Payments Board.

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