What to Know:
- The European Central Bank (ECB) announces agreements with tech providers for the potential launch of a digital euro.
- These entities will provide services related to fraud management, secure payment information exchange, and software development.
- Although the ECB is yet to make a final decision on the launch, a digital euro could possibly see the light of day by 2029.
The progression of Ripple’s XRP and Bitcoin in the crypto market has been nothing short of remarkable. However, the European Central Bank (ECB) has its sights set on a different milestone – the launch of a digital euro. The bank recently announced framework agreements with seven tech firms, a move seen as a significant step towards the potential launch of a central bank digital currency (CBDC).
In a recent announcement, the ECB revealed that it had finalised agreements with seven entities, including Feedzai and Giesecke+Devrient, to offer services for a potential digital euro. These services encompass fraud and risk management, secure exchange of payment information, and software development. Feedzai is well-known for its use of AI in fraud detection, while Giesecke+Devrient is a leading security technology company.
Following the successful conclusion of these agreements, Giesecke+Devrient and the other selected firms will work closely with the ECB to finalise the planning and timelines for the digital euro project. This work, guided by the ECB Governing Council and aligned with EU legislation, will involve the design, integration and development of the Digital Euro Service Platform.
This isn’t the ECB’s first foray into the world of digital currency. The bank has been exploring the possibility of a digital euro since 2021, moving into the preparation phase in late 2023. Although the bank’s final decision on the launch of the CBDC is contingent on the adoption of the Digital Euro Regulation, an ECB official hinted last week that a launch by 2029 could be on the cards.
The ECB’s move towards a digital euro isn’t without its safeguards. The bank has clarified that the actual development of the components will be decided at a later stage, subject to the ECB Governing Council’s decision on the potential next phase of the project. Furthermore, the framework agreements do not involve any payment at this stage and can be adjusted according to changes in legislation.
In addition to the aforementioned services, the technology companies will also provide an ‘alias lookup’, allowing digital euro users to send or receive funds without necessarily knowing the details of the Payment Service Provider of the other user. Giesecke+Devrient will also be responsible for the engineering and development of an offline payment system for the digital euro.
While the ECB is exploring the potential of launching a digital euro, it, along with European Union financial watchdogs, has expressed concerns about the possible risks posed by certain stablecoins. These concerns contrast with the position of the US, which has established a regulatory framework for stablecoins following the signing of a stablecoin bill into law by President Donald Trump in July.
In conclusion, the ECB’s move towards a potential digital euro signals a significant shift in the crypto market. While the bank is yet to make a final decision on the launch, the agreements with technology companies are undoubtedly a step in the right direction. It remains to be seen how these developments will influence the broader adoption of digital currencies by institutions and the regulation of the crypto market.
