The Eurosystem, which consists of the ECB and the national central banks of EU countries with the euro as their currency, has invited market participants to participate in a market study.

This would allow them to understand the domain-specific expertise and ongoing experience required to develop potential technical solutions for a digital euro.

According to the report, several European providers can develop digital euro solutions. According to a statement from the Frankfurt Bank, this also implies that various technological and architectural design solutions could be used to establish a technical framework for a digital euro. The ECB conducted a prototype exercise between July 2022 and February 2023 to determine what using a digital euro could be like for various use cases.

The exercise required the integration of five user interfaces (front-end prototypes) developed by several suppliers for each use case and a settlement system (back-end prototype) designed by the Eurosystem.

According to the statement, numerous design alternatives were evaluated to determine whether it would be technically feasible to implement and incorporate them into the Eurosystem’s settlement mechanism.

“The tests concluded that it is possible to smoothly integrate a digital euro into the existing payment landscape, while still leaving scope for the market to use innovative features and technologies when distributing a digital euro. The findings also confirm that a digital euro could, in principle, work online and offline using different technical designs,” the ECB said.

The bank concluded that it remains to be determined whether an offline solution that satisfies Eurosystem standards and provides the requisite scale can be provided in the short to medium term with the current technology.

Upcoming Judgment

The EU officially launched its digital euro initiative in October 2021. In the fall of 2023, the ECB’s Governing Council will determine whether to proceed with a planning phase to create and test the central bank digital currency (CBDC) proposed by the EU.

“If the Governing Council opts to go ahead with a preparation phase, this does not necessarily mean that it will issue a digital euro. The Governing Council will take a dedicated decision on whether to issue a digital euro at a later stage,” according to the bank.