The European Central Bank (ECB) is accelerating its preparations for the potential introduction of a digital euro, having announced agreements with various technology providers to build critical components for the central bank digital currency (CBDC). This strategic step, disclosed in a recent announcement, reflects the ECB’s commitment to exploring the viability of a digital euro while updating its technological framework.
In a detailed notice released on Thursday, the ECB revealed that it has reached framework agreements with seven tech firms, with the possibility of adding at least one more in the near future. These selected providers will focus on essential services ranging from fraud and risk management to secure payment information exchanges and software development. Notable amongst the chosen companies is Feedzai, recognized for its use of artificial intelligence to bolster fraud detection, alongside Giesecke+Devrient, a notable security technology firm.
Dr. Ralf Wintergerst, CEO of Giesecke+Devrient, commented on the collaboration, stating, “Following the conclusion of the framework agreements, G+D and the other successful tenderers will begin working with the ECB to refine planning and establish timelines.” He emphasized the importance of adhering to guidelines set forth by the ECB Governing Council and the necessity of aligning development efforts with EU regulations.
The ECB has been examining the concept of a digital euro since 2021, and the latest move signals a shift into an active preparatory phase as of late 2023. However, the ECB has made it clear that any final decision regarding the official launch of the CBDC will be contingent upon the adoption of the Digital Euro Regulation. A spokesperson from the ECB indicated that there is potential for a launch as soon as 2029, although this remains subject to various approvals.
Importantly, the framework agreements established by the ECB do not mandate any payment at this initial stage, but include provisions that allow for adjustments based on evolving legislative changes. The scope of work will encompass several functionalities, one of which includes an “alias lookup” system. This feature aims to enable users to send or receive digital euro payments without the necessity of knowing the recipient’s Payment Service Provider details.
Additionally, Giesecke+Devrient will work on offline payment capabilities, allowing users to make or receive transactions with digital euros even without an internet connection. This ambition to enhance accessibility and usability reflects the ECB’s intention to make the digital euro a practical option for everyday transactions.
As the ECB explores this digital currency initiative, it faces a contrasting regulatory landscape compared to the United States. While European authorities, including ECB officials, have voiced caution regarding the risks posed by stablecoins on local markets, the U.S. has seen legislative advancements. In July, the U.S. Congress passed a stablecoin regulation bill, providing a structured framework for these digital assets.
ECB President Christine Lagarde has recently urged EU lawmakers to collaboratively address potential risks associated with stablecoins issued by companies operating under the EU’s Markets in Crypto-Assets framework (MiCA) as well as non-EU players. Moreover, the European Systemic Risk Board has reportedly made a non-legally binding suggestion to prohibit the issuance of similar stablecoins in a bid to manage these risks effectively.
As discussions around digital currencies continue to evolve, the ECB’s framework agreements mark a significant step towards realizing the potential of a digital euro while ensuring the security and integrity of the European financial landscape.
