Bank of Lithuania

The European Central Bank (ECB) is working with the euro area national central banks to investigate whether to introduce a digital euro. It would be a central bank digital currency, an electronic equivalent to cash. It would complement banknotes and coins, giving people an additional choice about how to pay.

A digital euro would offer an electronic means of payment that anyone could use in the euro area. It would be secure and user-friendly.

A digital euro would be the money issued by the ECB and it would be different from private sector money. You could also use a card or a phone app to pay with it.

Digital euro


Why would we need a digital euro?

As demand for safe and trusted electronic payments continues to grow, the Eurosystem is considering launching a central bank digital currency in Europe. Having digital money issued by the central bank would guarantee the stability of the payment and monetary systems. A digital euro would also strengthen the independence of the euro area and promote competition and efficiency in the European payment sector.

What would be the advantages and challenges of a digital euro?

As investigations are still being carried out, we do not have all the information for the final proposal yet. However, the Eurosystem has had many discussions on the idea of a digital euro, its pros and cons. It is already clear that a digital euro should be widely accessible, reliable, safe, efficient and compliant with the current legislation. Furthermore, it would ensure the highest level of privacy.

Would a digital euro replace cash?

No, a digital euro would be complementing cash, not replacing it. Cash will continue to be available in the euro area. A digital euro would be just another way to make payments in Europe in euro, our single currency. It would be exchanged for cash on a one-to-one basis. A digital euro would meet the needs of an increasingly digital society.

How is central bank money, or public money, different from private sector money?

The monetary system consists of two types of money: central bank money and private sector money. Cash is not the same as electronic payment – it is central bank money, whereas in the case of electronic payment it is private sector money.

We all use both types of money all the time. This model fits well with the needs of society: the central bank creates the monetary base, i.e. central bank deposits for banks and cash for the population, while the private sector offers payment instruments (e.g. credit cards) to customers based on commercial bank money (e.g. deposits).

The fact that the population can convert private (commercial bank) money into public (central bank) money at any time on a one-to-one basis and use the central bank money for payments is very important.

This guaranteed convertibility creates and maintains confidence in both private and public money. It also ensures the function of the currency as a common unit of account. Public money is therefore the foundation of a well-functioning payment system, helping to safeguard financial stability and confidence in the currency.

What consequences would a digital euro issuance have for the banking sector?

A digital euro should not have negative consequences for the financial system. It will be sought to ensure that a digital euro is mainly used as a means of payment and not become an instrument for financial investments, and only supervised intermediaries are involved in the handling of a digital euro.

There are also some risks associated with the excessive use of the digital euro for investment purposes, if the main purpose to use it as a means of payment is not taken into account.

Safeguards are needed to prevent the transfer of too many bank deposits to the central bank, which could disrupt efficient bank lending to customers and companies or destabilise the banking sector in times of financial stress.

Why would a digital euro be better than stablecoins and crypto-assets?

A digital euro would be central bank money. Central banks have a mandate to maintain the value of money, independently of its physical or digital form.

This means that it would be backed by a central bank and designed to meet the needs of citizens, it would be risk free and comply with privacy and data protection requirements.

The stability and reliability of stablecoins ultimately depend on the entity that issues them and on the credibility and enforceability of their pledge to maintain value over time. Moreover, private issuers may also use personal data for commercial purposes. In addition to slow transactions and high costs, issuers of stablecoins do not clearly specify how they can be used. However, it cannot really be used to pay everyday bills.

In recent years, various new types of cryptocurrency have been developed around the world. These are also known as cryptocurrencies. However, this name is misleading because these so-called currencies do not fulfil the three functions of money: to be a reliable means of exchange, to maintain value, and to function as a unit of account. Furthermore, these assets are not backed or managed by any central authority. There is no guarantee that they can be exchanged for official currencies when needed. There is no identifiable entity liable for crypto-assets, which means that your claims cannot be enforced.

Will a digital euro be based on a distributed ledger technology (DLT), such as Blockchain?

The Eurosystem is experimenting with different approaches and technologies to making a digital euro available. This includes both centralised and decentralised solutions, such as DLT, however, no decision has been taken yet.

Why would consumers want to use a digital euro?

In a world where people are making more and more payments electronically and where the digital payments market continues to grow, a digital euro would provide an additional choice to make payments using central bank money.

A digital euro would be a digital means of payment that is as secure, as easy to use and as cheap as cash is today. People using it for basic payment needs would not incur any additional costs, and it could be used everywhere within the euro area.

For payees such as merchants and small businesses, a digital euro would provide an additional means to receive payments from their customers.

The introduction of a digital euro could promote digitalisation and enable all citizens to use their preferred payment instruments. Digitisation can in turn help the economy to grow.

Another advantage is that a digital euro would enhance the resilience of our currency to unregulated technological developments in the banking and financial sectors, such as crypto-assets and alternative payment solutions that are not covered by the major card schemes, which could undermine financial stability.

What if a non-euro area central bank issues its digital currency before the Eurosystem?

All major central banks are examining the possibility of issuing a central bank digital currency. There is a common understanding at the G20 level that cooperation is needed when it comes to the international use of central bank digital currencies.

The Eurosystem is collaborating with other central banks to understand the implications of issuing a digital currency for their economies. We benefit by sharing our respective thoughts and experiences.

We are looking into the possibility to issue a digital euro that would respond to our citizens’ needs and plan to rely on the existing European options of payments, taking into account the principles of autonomy and sovereignty.

Thoroughness and safety come before speed. We need a system that works for everybody and is reliable from day one. A digital euro requires a certain infrastructure on the part of central banks and the supervised intermediaries involved in this process.

What is the timeline for introducing a digital euro?

Before taking a decision on whether to issue a digital euro, we need to decide on its potential design and test its ability to meet the end users’ needs. A number of steps will need to be taken before a digital euro can be introduced. It should be noted that a digital euro will not be issued until all the necessary legislation is in place.

Following the experimentation done by the ECB and the euro area national central banks, the investigation phase of the digital euro project was launched in July 2021. This phase aims to identify the optimal design of a digital euro and ensure it meets the needs of its users. During this phase, it will be also analysed how financial intermediaries could provide front-end services that build on a digital euro.

This work will be completed by October 2023.

The Governing Council of the ECB will then decide whether to move to the next phase, in which we could see the development of integrated services as well as carry out testing and possible live experimentation of a digital euro. This phase could take around three years.

This matter is considered a priority but must not be rushed to avoid mistakes. The impact of a digital euro must be analysed carefully before taking any decision.

What data would be processed for payments made in digital euro? Will it be possible to trace people’s payment behaviour and share it with government agencies and other public institutions?

The Eurosystem has no interest in collecting payment data from natural persons, tracing their payment behaviour or sharing such data with government agencies or other public institutions.

For digital euro payments, there would be no obligation to provide your data to third parties, unless this is necessary to prevent illicit activities.

For payments to remain a private matter, different types of data would need to be protected: the user’s identity, data on the individual payment (e.g. its amount) and metadata related to the transaction (e.g. IP address of the device used for the transaction).

Users will likely have to identify themselves to supervised intermediaries when first accessing digital euro services, but in each case different degrees of privacy can still be maintained for their payments.

Privacy could also be supported in other ways. For example, users’ identities could be kept separate from the payment data, allowing only financial intelligence units to obtain this information within a well-defined legal framework in order to identify the payer and payee when criminal activity is suspected.

External companies have been appointed to develop prototypes for potential user interfaces. What is the purpose of that?

Prototypes are developed in an experimental environment for learning purposes. It is a kind of “lab exercise”. Tests are carried out on the extent to which the Eurosystem’s back-end functions (the settlement infrastructure working in the background to record transfers and digital euro positions) can be smoothly integrated with existing front-end payment solutions available to the public.

A major focus is placed on integration in five specific use cases: peer-to-peer online payments; peer-to-peer offline payments; point-of-sale payments (e.g. in shops, initiated by the payer); point-of-sale payments initiated by the payee; and e-commerce payments.

No real payments will be processed in the prototyping exercise, since a digital euro has not been issued yet and merely simulations are being conducted. The prototype resulting from these experiments is not intended to become the core of an eventual production system.

How did the ECB select the companies participating in the prototyping?

The ECB ran a public call for expressions of interest for taking part in the prototyping exercise. A total of 54 companies applied, of which five were selected.

Four essential capabilities and 28 specific capabilities (defined in advance and published on the ECB’s website) were used to assess applicants’ suitability for the five use cases mentioned above.

Will the results of the prototyping be published?

The need for transparency to guarantee a level playing field was set out in the initial call for interest. The ECB decided to go beyond what EU rules foresee for unremunerated contracts and applied greater transparency than required. Candidates were made aware that all information will be announced.

During the development phase in the fourth quarter of 2022, the ECB provided technical clarifications, as needed, to the providers of front-end prototypes and aligned integration expectations with these providers (i.e. how the front and back-end components may be interfaced for the prototyping exercise).

Results of the prototyping exercise with the supporting technical information in English are available here.


Digital euro scheme rulebook

Why do we need a digital euro scheme?

Following the decision of the ECB’s Governing Council to launch the investigation phase of the digital euro project, the Eurosystem has explored various options for the distribution of a digital euro. A digital euro scheme* is considered to be the best option for achieving the objectives of a digital euro and harnessing the respective strengths of the public and private sectors. The digital euro scheme will lay out the common rules and procedures for the distribution of the digital euro by supervised intermediaries, ensuring consistent accessibility and user experience across the euro area. It will also allow sufficient flexibility for the private sector to innovate and offer value-added services on top of digital euro services.

* Note: A scheme, in the context of payments, is a set of formal, standardised and common rules that enable intermediaries to transfer funds electronically between end-users, enabling payers and payees to use or accept electronic payment instruments. These rules are defined via a scheme rulebook and are applicable to all intermediaries participating in the scheme.

How will the digital euro scheme rulebook be developed?

To support the digital euro scheme rulebook (hereinafter – the rulebook), obtain market input and gain the perspective of the industry, consumers and merchants, the Eurosystem established a digital euro scheme Rulebook Development Group. The group is composed of Eurosystem staff and market representatives with relevant experience. It works on the basis of the design options endorsed by the Governing Council as regards the digital euro programme.

The group is headed by the Chair who reports directly to the Programme Manager of the digital euro project. Market representatives were nominated by relevant European stakeholder associations that represent key players in the European retail payments market, such as:

  • on the supply side: payment service providers, the banking community, payment institutions or e-money institutions;
  • on the demand side: consumers, retailers with a physical presence, online retailers, businesses/corporations and small and medium-sized enterprises.

Candidates were selected by the digital euro team based on their experience in retail payments and the skills required for the role. Candidates selected have become members of the digital euro scheme Rulebook Development Group, representing their respective stakeholder associations.

The digital euro scheme Rulebook Development Group plans to meet on a monthly basis. The members are expected to review and provide feedback on the draft sections of the Rulebook prepared by the Group’s secretariat.

Moreover, in parallel to the Rulebook Development Group, a number of Rulebook development workstreams will be launched to focus on specific sections of the digital rulebook that require particular expertise. The precise scope, composition and approach for each workstream will be assessed on a case-by-case basis. Like the digital euro scheme Rulebook Development Group, the composition of the rulebook development workstreams will typically involve representatives from both the Eurosystem and the European retail payments sector. They will be expected to review and provide feedback on draft material prepared by the group’s secretariat. Draft sections of the rulebook prepared in the various rulebook development workstreams will always ultimately be presented and reviewed in the Rulebook Development Group.

What scope will the digital euro scheme rulebook cover?

The digital euro scheme will lay out the common rules and procedures that supervised intermediaries must follow for the distribution of the digital euro. The rules and procedures will cover the following:

  • the functional and operational model of the digital euro scheme (e.g. end-to-end flows, core requirements for supervised intermediaries, minimum user experience standards, etc.);
  • the adherence model of the digital euro scheme (e.g. scheme eligibility criteria, obligations of participants, etc.);
  • the technical scheme requirements (e.g. IT infrastructure, application programming interface implementation, technical standards, etc.);
  • the risk management requirements;
  • the digital euro scheme management rules (e.g. scheme governance, change management processes, etc.).

How can Europeans contribute to the development of the rulebook?

External input on the rulebook will be coordinated by the Eurosystem through the Rulebook Development Group, as well as through associated workstreams. A major focus will be placed on specific sections of the rulebook for which the rulebook development workstreams will be responsible. As the members of the Rulebook Development Group are representatives of European stakeholder associations, they represent the views of their respective stakeholder associations. It is their responsibility to ensure that one aligned view is reached on each issue at hand.

The composition of the Rulebook Development Group and the procedure for joining this group are briefly described above under “How will the digital euro scheme rulebook be developed?”.

The composition of the Rulebook development workstreams will, depending on the focus of each workstream, be decided on a case-by-case basis. Typically, they will involve representatives from the impacted stakeholders, such as European consumers and merchants as well as supervised intermediaries and representatives. Information on application procedures for joining the respective rulebook development workstreams will be published on the ECB’s website.



Last update: 13-07-2023