A digital euro could be issued by the European Union (EU) within four years, a senior official from the European Central Bank (ECB) said Monday, with peer-to-peer payments potentially among the first uses.
The timeline for the central bank digital currency (CBDC) has been pushed back and forward because of concerns over Russia’s war in Ukraine and the rise of private stablecoins like Facebook’s now-abandoned libra.
“The idea would be that, let’s say, four years from now, we will be ideally ready to issue the digital euro,” Fabio Panetta, a member of the European Central Bank’s executive board, said at an event at the National College of Ireland. “It’s a very complex project, never done before … I’m a bit optimistic that in four years’ time we will be prepared.”
Peer-to-peer (P2P) payments, allowing transactions among friends, could be the first testing ground for the new technology before it spreads to other areas like payments in stores or online, Panetta suggested.
“A P2P payment solution that covers a broad set of users across the entire euro area could provide fertile ground for the adoption of a digital euro,” he said, citing research that showed the application would have widest use early on.
In October, the ECB started a two-year investigation phase to look at issues like what use cases to prioritize, although the ECB hasn’t decided yet on whether to issue a digital euro in the first place. Panetta has previously said that a realization phase due to start late next year could last three years.
In March, ECB President Christine Lagarde said the sanctions following the war in Ukraine offered a reason to speed up the plans, but other EU officials Monday suggested they were taking their foot off the gas pedal.
“There was some time back a sense of more urgency, because of the concerns of what might happen from private providers,” Mairead McGuinness, the EU’s financial-services commissioner, said at the same event. “Nobody is rushing … we need to move swiftly but not hastily.”
The idea of the EU issuing its own CBDC first emerged after an industry consortium led by Facebook proposed its own crypto currency, libra, subsequently renamed diem before being abandoned.
But recent collapses in the private crypto market may add yet one more reason to pursue the project, Panetta said.
Stablecoins don’t have the regulatory safety net offered to banks and “are therefore vulnerable to runs,” he said, citing the crash last week of terraUSD (UST), which is supported by the nonprofit Luna Foundation Guard.
“Just last week the world’s biggest stablecoin temporarily lost its peg to the dollar,” he added, referring to the Tether asset (USDT).
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